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BARLOWORLD LIMITED CONSOLIDATED AND COMPANY ANNUAL FINANCIAL STATEMENTS 2019 One Barloworld Delivering value About Barloworld Barloworld is a distributor of leading global brands with head offices in Johannesburg (South Africa) and Maidenhead (United Kingdom), providing integrated rental, fleet management, product support and logistics solutions. Established in 1902 in South Africa, we are one of the country’s oldest companies. Inspiring leadership, a reputation for ethical conduct, innovation and a commitment to giving back have ensured Barloworld’s longevity over the past 117 years. The core divisions of the group comprise Equipment (earthmoving equipment and power systems), Automotive (car rental, motor retail, fleet services, used vehicles and disposal solutions) and Logistics (logistics management and supply chain optimisation). The brands we represent on behalf of our principals include Avis, Audi, BMW, Budget, Caterpillar, Ford, Mazda, Mercedes-Benz, Toyota, Volkswagen and others. SEND US YOUR FEEDBACK Help us to understand what matters to you by sending your comments and feedback on our integrated report to [email protected] or [email protected] or visit www.barloworld.com to download the feedback form. Contents PAGES About Barloworld IFC Review and reports Group finance director’s review 2 Director’s responsibility and approval 7 Preparer of financial statements 7 Independent auditor’s report 8 Certificate by secretary 12 Audit Committee report 13 Directors’ report 17 Consolidated financial statements Acccounting policies 19 Consolidated income statement 29 Consolidated statement of other comprehensive income 30 Consolidated statement of financial position 31 Consolidated statement of changes in equity 32 Consolidated statement of cash flows 34 Notes to the consolidated cash flow statement 36 Notes to the consolidated annual financial statements 38 Company financial statements Company statement of comprehensive income 118 Company statement of financial position 119 Company statement of changes in equity 120 Company statement of cash flows 121 Notes to the company financial statements 122 Additional information Consolidated seven-year summary 134 Consolidated summary in other currencies 144 Definitions 148 Corporate information IBC 1 Group finance director’s review The following commentary is against restated Equipment southern Africa’s operating comparatives to reflect the year-on-year profit was marginally up at R1 836 million results from continuing operations unless (2018: R1 790 million), impacted by the Our most recent specifically stated. stronger after-sales mix, market pressures and investments in business transformation. projections indicate The group adopted IFRS 15 and IFRS 9 in the reporting period. However the impact Russia managed to improve the quality of the that if we execute of these new accounting standards has not operating margin from 10.3% to 11.6% due successfully on the been significant to the group’s results. to the change in sales mix and tight control over expenses. various strategies Our leading market positions, strong brand representation and long-term customer Automotive delivered strong results with currently underway, relationships, as well as broad customer operating profit of R1 084 million, 2.3% coverage served us well for delivering ahead of last year (2018: R1 060 million) we could recognise a value in challenging circumstances. on the back of a solid performance in ROE uplift in excess Motor Trading. In Logistics, operating profit FINANCIAL PERFORMANCE was impacted by the factors driving the of our current ROE FROM CONTINUING revenue decline, particularly the KLL losses OPERATIONS FOR THE YEAR ENDED 30 SEPTEMBER 2019 and closure costs amounting to R92 million target of 15% by (2018: R47 million). Revenue for the group decreased by 5.4% around 2022. from R60.1 billion to R56.8 billion. Equipment The performance of the group was impacted southern Africa performed well and generated by a once-off charge of R88 million revenue of R20.4 billion (2018: R19.8 billion). (GBP4.7 million) which was required to The 3.3% increase over the prior year was give effect to the guaranteed minimum mainly as a result of strong after-market pension (GMP) equalisation requirements activity. Following a record performance of the UK defined benefit pension scheme. In September 2019, management took the in 2018, Equipment Russia's revenues Furthermore, R73 million of costs related firm decision to dilute the group’s interest decreased by 28.6% to USD433 million to the implementation of our ‘Khula Sizwe’ in the Avis Fleet leasing business to a 50% (2018: USD606 million), with the impact on B-BBEE transaction were incurred in the year. shareholding, with the ultimate aim to form the group’s results softened by the weaker Both these charges impacted the corporate a joint venture ownership structure. In terms rand. Automotive revenues of R25.0 billion segmental result together with continued of IFRS 5, the group has reported the results (2018: R26.5 billion) were down 5.6%. investment in corporate actions and skills of the Avis Fleet leasing business separately at the Corporate Centre to drive the active The Automotive trading business was impacted as a discontinued operation and assets and shareholder strategy. by the change in revenue recognition model liabilities held for sale. for Mercedes-Benz. The marginal rental rate Fair value adjustments on financial instruments increase in Car Rental was offset by the decline were positive (income) in the year, totalling in rental days and lower used car revenues. R32 million (2018: R122 million expense). Logistics' revenues were 12.6% down at These gains were driven by the decision to R5.2 billion (2018: R5.9 billion) largely as a result convert GBP150 million of the Equipment of the closure of KLL, the downside currency Iberia sale proceeds to United States Dollar in impact on our Zimbabwean business, lower March 2019 in anticipation of the acquisition trading activity and non-renewal of contracts in of the Mongolian Caterpillar dealership. The late 2018. subsequent weakening of the pound sterling against the United States dollar resulted Operating profit for the group was in foreign exchange gains of R173 million. down 13.0% to R3 272 million (2018: This gain was offset by the cost of forward R3 762 million) with the operating points on foreign exchange contracts and margin declining from 6.3% to 5.8%. movements on foreign currency denominated totalling USD37.4 million (R268 million) significantly improved at R2.5 billion monetary items. compared to USD38.3 million (R251 million) (2018: R747 million). in 2018. NMI-DSM was recognised as an Finance costs, excluding those attributable The investment in the Angolan government associate effective 1 September 2019 and to the Avis Fleet discontinued operation of bonds to hedge our exposure in country contributed R4 million to equity-accounted R277 million (2018: R268 million), decreased reduced to USD56.8 million compared earnings. These gains were offset by losses to R808 million (2018: 877 million) as a result to USD66.4 million at September 2018. of R21 million incurred by our Zimbabwean of lower borrowings across the group and The limited movement in the year is a result investments in Barzem arising from the prudent invested capital management within of our investment in longer dated bonds with devaluation of its local currency-based the operations. maturities through to 2022. Where possible, monetary assets and R16 million in losses we have taken full advantage of increased Gains from non-operating and capital items incurred by BHBW (Pty) Ltd, our agriculture dollar liquidity and repatriated dividends of of R87 million resulted largely from the and handling JV. USD22 million to the UK holding company. R212 million write-up of our remaining 50% Profits from discontinued operations, including investment in NMI-DSM from cost to fair value Investing cash flows have largely related the impact of finance charges on debt utilised as required by IFRS 3: Business Combinations, to investments in technology to enable in funding these businesses, incorporated the together with a R5 million gain on the our digital and business transformation Avis Fleet business together with the results of disposal of our 1.18% controlling interest in strategies, and in the development of the the Iberian operations from the prior year. this business and profits realised on the sale of Equipment southern Africa campus in Isando. KLL trucks in Logistics. Avis Fleet generated profits of R210 million (2018: R253 million) and was impacted by DEBT These gains were offset by further lower used car revenues due to contract In terms of our debt maturity profile, liquidity impairments taken against the Logistics extensions. In the current year certain tax remains strong, with total interest-bearing businesses held for sale, as well as property uncertainties related to our Iberian operations debt down by R3.4 billion to R7.8 billion and investment impairments in Automotive. were resolved, resulting in the reversal of (2018: R11.2 billion). Notably, resulting The effective tax rate (ETR) (excluding the previously held provisions totalling R33 million. from our centralised Treasury strategy, the finance costs associated with Avis Fleet, group debt position at the year-end includes Normalised HEPS* of the group stood at prior year taxation and non-operating and the debt allocated to fund the Avis Fleet 1 167 cents, excluding the impact of the capital items) was marginally down to business of R2.8 billion. It is anticipated B-BBEE transaction charges and the GMP 28.8% (2018: 29.1%). The lower rate was that this debt will be repaid on disposal equalisation charge which was 1.4% up on largely driven by local currency movements of the Avis Fleet business, or alternatively, the prior year (2018: 1 151 cents). Including against the United States dollar functional the group facilities will be allocated to these charges, HEPS was down 4.4%. currency and taxes on gains made on the other value enhancing opportunities.

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