Barloworld Limited Annual Report 2002 Achieving Durability in Business Through Long-Term Value Creation for All Our Stakeholders
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Barloworld Limited annual report 2002 Achieving durability in business through long-term value creation for all our stakeholders. Contents 2 Financial highlights 52 People and community 3 Chairman’s review 56 Annual financial statements 8 Introduction to the Global Reporting Initiative (GRI) 138 Barloworld in the stock market 9 Value Based Management 138 Currency conversion guide 10 Chief executive officer’s review 139 GRI guidelines – cross reference index 14 Overview of the company 142 Notice of annual general meeting 18 Corporate governance 143 Proxy form 26 Board of directors 145 Corporate information 29 Global management 146 Shareholders’ diary 31 Impact and responsibility report For more information on our company and our brands, contact Barloworld Corporate Communication. Telephone +27 11 445 1202 Fax +27 11 445 1550 E-mail [email protected] Barloworld is an international industrial brand management company. We provide integrated product and service solutions to add value for our customers. Financial highlights for the year ended 30 September 2002 2002 2001 % 2002 2001 % Rand Rand change US$ US$ change Revenue (millions) 35 999 27 945 29 3 380 3 499 (3) Operating profit (millions) 2 067 1 487 39 194 186 4 Cash flow from operations (millions) 2 209 1 487 49 207 186 11 Earnings per share excluding exceptional items – basic (cents) 592 452 31 55,6 56,6 (2) Headline earnings per share (cents) 622 499 25 58,4 62,5 (7) Ordinary dividends per share (cents) 275 220 25 26 27 (3) Special centenary dividend per share (cents) 100 9,4 Net asset value per share (cents) 5 872 4 774 23 558 530 5 Total assets (millions) 27 097 21 946 23 2 573 2 436 6 Total borrowings to total shareholder funds excluding leasing operations (%) 23,3 31,1 Cash flow return on investment (CFROI®) 8,5 8,3 40 000 2 500 2 500 35 000 2 000 2 000 30 000 25 000 1 500 1 500 20 000 1 000 1 000 15 000 10 000 500 500 5 000 0 0 0 99 00 01 02 99 00 01 02 99 00 01 02 REVENUE (R million) OPERATING PROFIT (R million) CASH FLOW FROM OPERATIONS (R million) 300 700 700 600 600 250 500 500 200 400 400 150 300 300 100 200 200 50 100 100 0 0 0 99 00 01 02 99 00 01 02 99 00 01 02 ORDINARY DIVIDEND PER SHARE (Cents) HEADLINE EARNINGS PER SHARE (Cents) EARNINGS PER SHARE EXCLUDING EXCEPTIONAL ITEMS (Cents) 2 Barloworld Limited annual report 2002 Chairman’s review Our performance in 2002 showed once again Barloworld is now operating in 31 countries the resilience of Barloworld Limited in difficult around the world and more than 50% of our market conditions. Our geographic spread of operating profits are earned in hard currencies businesses, together with our financial strategy outside South Africa. and conservative and straightforward character, stood us in good stead. Your board is pleased to announce a final dividend of 185 cents, making a total dividend The results, prepared in terms of International for the year of 275 cents (2001: 220 cents). Financial Reporting Standards, showed revenues where we are today. The modern Barloworld increasing by 29% to R35 999 million (2001: In addition to the annual dividend your board group, led by the chief executive, Mr Tony Phillips, R27 945 million). has declared a special Barloworld centenary and his dedicated team of executives and staff, dividend of 100 cents per share. balanced and augmented by experienced non- Operating profits increased by a pleasing 39% executive directors, continues to acknowledge to R2 067 million. These translated into a In this our centenary year, I salute the many the sound principles of the past on which the 31% increase in earnings per share exclud- strong leaders we have had in the past and group has been built. ing exceptional items to 592 cents (2001: would especially like to mention the roles played 452 cents). Headline earnings increased by by our previous chairmen, Mr Mike Rosholt The corporate office, which provides leadership 25% to 622 cents (2001: 499 cents) after and the late Mr Punch Barlow. for the group, is in South Africa. This is the taking into account an adjustment for goodwill proven base from which to effectively direct amortisation and in this year a special one-off When I succeeded Mr Mike Rosholt as the our diverse operations as we move into global R100 million provision before tax to cover chairman of the board in 1991, I inherited a markets of choice with a modern uniform pension fund closure costs. group that had achieved its success through corporate identity. careful planning and sound judgement, a group Cash generated at the operating level was with long-term goals and objectives and, above South Africa R2 209 million – a 49% increase on that of the all, strong values and uncompromising ethics. The Barloworld businesses in South Africa have previous year. had a good year with continued profit growth To plan where we should go from here, it is coming from the Cement and Lime, Capital The balance sheet remains strong. important to understand how we came to be Equipment, Coatings and the Motor divisions. Barloworld Limited annual report 2002 3 Chairman’s review continued Steel Tube, in particular, had a strong any meaningful relaxation of exchange control Although they might not like to hear it, African profitability turnaround and much credit must in the short term. governments have to accept that it is they who be given to its management team for standing need the private sector for development, their ground when recent market conditions Elsewhere in the southern African region rather than the other way around. The private were against them. The Leasing operation where we trade, steady profits were made. sector can always go and invest elsewhere, as returned to profitability. Barloworld has strong African roots and has it has done in the past. the advantage of being able to combine the There has been an increase in much needed right products with adaptable strategies to fit Whilst the politicians have the responsibility infrastructural development expenditure in prevailing conditions. The exception in the past to create the environment for change, it is South Africa and this is the segment in which year has been the Cement interest in business investments that will anchor it in place. many of our businesses operate. Zimbabwe, which has to cope with deteri- orating political and hyperinflationary Australia The South African economy has been growing economic conditions. However, in the longer Our business in Australia did well and steadily, despite the slowdown in the term, this will become a strategic investment investments down under are making a growing developed economies of the world. The for the group. contribution to the Barloworld results. economic and fiscal policies, which are being followed, are sound. The current account is With the South African government and local The Motor companies, including the recent now in surplus, due in part to the strong business playing an influential role, there are acquisitions, held their own and Coatings performance of exports. early positive indications that the southern made a strong profit recovery as this division African region, in spite of less than ideal trading continues to establish itself in its competitive Inflation is proving to be more problematic and political conditions, is showing signs of markets. than was expected and this, together with the sustainable economic growth. This is being undervalued rand, is adding to key input costs, driven by the utilisation of the region’s vast oil With hindsight the timing for Barloworld to accelerating wage growth risks, and affecting reserves. It has been suggested that Africa is invest in Australia was good. The Australian food and oil prices. The 2003 inflation targets becoming one of the fastest growing sources of economy has shown resilience and has will not be reached and with the 2004 targets oil and gas for the hungry Western markets, continued to shrug off the negative getting tougher, they may also become and is lessening to a degree their dependence international trends. unachievable. on supplies from the troubled Persian Gulf. For corporate Australia, interest rates are low, I hope the recent interest rate hikes – occa- One senses that at long last the lesson is being the consumers are spending, businesses are sioned by the rising inflation perspective – will learnt in southern Africa that a stable and investing and profits are rising. not derail the upswing. transparent democracy is the best guarantee for economic development. There is also a However, there is a trend of seeing strong sales The rand is likely to remain soft, amid fears of a growing acceptance that business is the key to growth at the expense of tighter margins and global slowdown with easing commodity prices. the region’s economic wellbeing and this we will have to respond by controlling costs. There are concerns over Zimbabwe and its tragic sentiment was strongly endorsed at the recent self-inflicted situation. However, I believe the World Summit on Sustainable Development Europe knock-on effect on South Africa, as perceived by successfully hosted by South Africa. Turning to Europe, the Materials Handling and foreign commentators, has been overplayed. Paper businesses in the United Kingdom were But to hold the interest of business, risk levels steady in difficult trading conditions in a not Other factors that keep the rand undervalued must be acceptable and there must be clear very exciting business environment. In Scientific include the international perception that some objectives and lines of accountability. Above products the Laboratory business produced macro policies concerning bank lending and all, action has to occur at a faster rate and also good results, whilst the Melles Griot operations aspects of the mining charter are moving in the closer to the private sector modus operandi were affected by greatly reduced demand from wrong direction.