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.
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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. US-linked Angolan bonds and other capital CASH FLOWS Net interest-bearing debt of R582 million items. This was somewhat offset by losses The group generated R3.1 billion in free cash was R2.7 billion down on the prior year in KLL for which no deferred tax has been flows against R3.6 billion in the prior year. (2018: R3.3 billion) driven by strong recognised, together with the effect of This is a notable improvement in the cash cash conversion in our businesses currency translation on reduced inventory conversion of our operations particularly when and the cash holdings from the holdings in the group. considering that prior year investing cash sale of Iberia in the prior year. Profits from associates and joint ventures was flows included R2.5 billion from the sale of In September 2019, BAW24, totalling largely flat on the prior year at R231 million our Iberian operations. R501 million was refinanced with a three- (2018: R235 million). Despite increased The group’s investment in working capital year bond, BAW31, for R500 million. activity in the first three quarters of the decreased by R2.8 billion largely due to The increase of liquidity volumes and year from our Bartrac JV in the Katanga reductions in inventories and receivables. tightening of spreads within this market province of the DRC, profitability slowed Investments in rental fleets across the was favourable for bond issuances. in the last quarter as a result of regulatory Automotive and Equipment rental fleets were uncertainty and weakening cobalt prices, South African short-term debt includes contained at R2.1 billion (2018: R2.2 billion). with annual equity-accounted earnings commercial paper totalling R500 million Overall cash flows from operations were
2 3 Group finance director’s review CONTINUED
(2018: R700 million). We expect to maintain do not generate returns in line with the group In order to address the group’s capital our participation in this market to the extent hurdle rates. Consequently, it is management’s structure and increase offshore we are able to achieve funding rates which intention to dilute this interest to a 50% gearing, where costs of funding are are competitive with existing short-term shareholding. Once our controlling interest is comparatively low, we have embarked funding lines and funding requirements. diluted, this business will be deconsolidated, on a capital restructuring of our UK the debt in the group’s balance sheet business. In the first quarter of 2020 At 30 September 2019 the group had refinanced and the results of Avis Fleet will we will be repatriating GBP70 million to unutilised borrowing facilities of R10.6 billion be equity-accounted as a joint venture. South Africa and at the same time we will (2018: R10.6 billion) of which R7.1 billion contribute an additional GBP30 million (2018: R8.0 billion) was committed. Despite growth in operating profits across towards the pension fund deficit. numerous of our businesses, our low level of During the year, the group’s ratio of long- gearing has resulted in higher than optimal to short-term debt was 56:44, compared levels of invested capital. Consequently, to 54:46 at September 2018. Cash ROIC, EP and ROE declined in the year. and cash equivalents were R7.2 billion (2018: R7.9 billion), highlighting our strong, liquid balance sheet position. REVENUE (Rbn) OPERATING PROFIT (Rm)
58.4 60.1 3 762 FINANCIAL POSITION 56.8 3 461 3 272 Total assets employed in the group decreased to R47.2 billion (2018: R49.3 billion) driven by the deconsolidation of NMI-DSM, together with lower working capital and a decrease in cash.
The UK pension scheme deficit increased from 2017 2018 2019 2017 2018 2019 R1.8 billion (GBP95 million) to R2.1 billion (GBP113 million) mainly due to a decrease in the AA corporate bond yield which increased HEPS AND NORMALISED HEPS ANALYSIS* (Rm) the estimated future pension liability. 42 8 Net assets held for sale of R3.6 billion (13) (50) 35 (8) (41)
(2018: R370 million) comprise the Avis 1 192 66 (15) (35)
Fleet leasing business, Logistics Middle 1 167 1 1 151 (33) (34) East and SmartMatta businesses together (16) with the Barlow Park office park currently
undergoing re-development and certain 1 100 properties in our Equipment SnA business. The KLL business held for sale in 2018 was closed down during the year.
Much like the decisions taken to divest from operations – operations
other business interests over the past few DRC Handling Sep 2019 Sep 2019 Avis Fleet Avis Fleet Avis KLL losses operations HEPS year profits year B-BBEE costs years, the decision to dilute our investment HEPS SEP 2018 deposits Corp UK Corp deposits Equipment Russia Logistics excl. KLL Pension fund GMP Brazem and others and Brazem Normalised HEPS – HEPS from continuing Equipment Iberia prior net of tax UK and RSA Fv adjustments on USD Automotive excluding – BWE snA excl. associates Group Group in the Avis Fleet leasing business is aligned abnormal excl. Corporate to the group’s strategy to optimise returns on invested capital and to create capacity for * Including Avis Fleet growth opportunities. While we recognise this is a strong return on equity business, the leasing operations are capital intensive and be made to the Barloworld Empowerment EXTERNAL AUDITOR ROTATION WEIGHTED AVERAGE COST Foundation. OF CAPITAL (%) A comprehensive closed request for proposal process was conducted during the year to This move away from property ownership to 13.2 select new external auditors for the company 12.3 12.5 ’lesseeship’ is a significant change in strategy and group. Resulting from this tender process, for Barloworld. Accordingly, there will be the audit committee will recommend Ernst transparent disclosures of the impact of this and Young (EY) for appointment as the deal on the underlying operations and the new external auditors for the company and group going forward. Although under IFRS group effective financial year ending 2020. 10, Khula Sizwe will be consolidated into the This will be a shared auditor appointment group’s results, in 2020 we will be presenting with SizweNtsalubaGobodo-Grant Thornton 2017 2018 2019 the impact of Khula Sizwe as a separate (SNG‑GT), the existing auditors of our segment within the group, and there will be Logistics business and the Khula Sizwe clear reconciliation of the impact of the Khula entities. SNG-GT will perform 30% of the Sizwe rentals on our underlying businesses. We remain committed to deploying group audit in FY2020 and increase their this capital towards targeted growth In 2019, deal implementation costs of participation over three years towards a 50/50 opportunities that will create value for our R73 million were incurred and capital joint audit arrangement with EY in 2023. shareholders or, should these opportunities expenditure of R99 million was invested in We thank Deloitte for their many years of not materialise, a share buyback will be the properties that are part of the Khula service as the group’s external auditors. considered if our share price is below Sizwe transaction. The black public offer our view of the group’s intrinsic value. raised R163.4 million in equity funding 2020 OUTLOOK which was recognised in financing cash flows KHULA SIZWE B-BBEE Notwithstanding the disappointing result of the group. TRANSACTION of our Logistics business in the current year,
Following shareholder approval of our IMPACT OF IFRS 16: LEASES we expect to begin realising significant Khula Sizwe B-BBEE deal at our annual general cost efficiencies and operational synergies While IFRS 16 will have a significant impact meeting on 14 February 2019, this R2.9 billion – the integration of our Automotive and on the measurement and classification of transaction has been fully funded via an 80% Logistics businesses. With the implementation our rental expenses and cash flows, the net external bank loan and 20% equity funding. of our Barloworld Business System across impact of the transaction on profit after tax is The equity funding comprises a Barloworld the group, we anticipate that these new expected to be less than 1%. The following facilitated employee and management interest ways of working, founded on lean principles summarises the expected impact of the new totalling 70% with the remaining non- and continuous improvement, will position leasing standard: controlling interest of 30% raised through a us well to withstand the downward trends formal offer to the black public. ○○ At 30 September right of use asset (RoU) of the local and global economies. We do to be recognised: R2.4 billion – R2.5 billion not anticipate these trends reversing in the It is management’s expectation that the immediate future. majority of the South African properties ○○ At 30 September lease liability to be within this transaction should be transferred recognised: R3.0 billion – R3.1 billion We are already seeing the benefits of into the Khula Sizwe entity by the end of the BBS being realised in our Equipment ○○ Depreciation of the RoU in 2020: December 2019. southern Africa business through increased R500 million – R600 million (lease cash flows and reductions in invested As the properties are transferred, which smoothing under IAS 17 would have been capital, and this trend is expected to will generate R2.2 billion in free cash flows R775 million) continue. The resourcing of the active to the group in 2020, the 10-year rental ○○ Finance charge increase: corporate centre is nearing completion and agreements with our underlying subsidiaries R300 million – R400 million we anticipate a period of adjustment in 2020 will commence. Concurrently, the transfer as duplicated functions are re-deployed from of 3% of Barloworld shares in issue, being ○○ Profit after tax/headline earnings decrease: our divisions to higher value activities across approximately 6.6 billion ordinary shares, will R100 million – R300 million the group.
4 5 Group finance director’s review CONTINUED
Optimising the capital structure of the group to enhance returns will be greatly assisted by the capital reduction from the UK and the increased leverage of the offshore operations, including the acquisition of the Mongolian Caterpillar dealership. Executing on the sale of the non‑core Logistics businesses and the dilution of our interest in the Avis Fleet business are key priorities for management in 2020.
Generating free cash flows remains imperative. So too, does ensuring that the group’s assets generate a return on invested capital above our stated target weighted average cost of capital target of 13%. Our strong cash position, which will be bolstered by the capital released from the Khula Sizwe transaction, will enable us to take advantage of high growth opportunities which we continue to explore through a dedicated mergers and acquisitions function led by the Corporate Centre.
Our most recent projections indicate that if we execute successfully on the various strategies currently underway, we could recognise a ROE uplift in excess of our current ROE target of 15% by around 2022.
APPRECIATION I would like to thank Don Wilson, as well as my board colleagues and the group executive committee for their support and guidance during the handover period.
I would also like to extend my appreciation to the finance team's commitment to ensuring the highest standards of integrity, governance and financial discipline maintained in the group.
NOPASIKA LILA Group finance director Directors’ responsibility and approval
The directors of Barloworld Limited (the company) have the pleasure of presenting the consolidated (Barloworld Limited and its subsidiaries also referred to as the group) and company financial statements for the year ended 30 September 2019.
In terms of the South African Companies Act 71 of 2008 (as amended) the directors are required to prepare the consolidated and company financial statements that fairly present the state of affairs and business of the group and company at the end of the financial year, and of the profit or loss for that year. To achieve the highest standards of financial reporting, these financial statements have been drawn up to comply with International Financial Reporting Standards (IFRS) and interpretations of IFRS standards, as issued by the International Accounting Standards Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and the Companies Act.
The reports by the chairman, the chief executive, the finance director and the detailed operational reports discuss the results of operations for the year and those matters which are material for an appreciation of the state of affairs and business of the company and of the Barloworld group.
On the recommendation by the audit committee, the directors considered and are satisfied that the internal controls, systems and procedures in operation provide reasonable assurance that all assets are safeguarded, that transactions are properly executed and recorded, and that the possibility of material loss or misstatement is minimised. The directors have reviewed the appropriateness of the accounting policies, and concluded that estimates and judgements are prudent. They are of the opinion that the financial statements fairly present in all material respects the state of affairs and business of the group and company at 30 September 2019 and of the profit for the year to that date. The external auditors, who have unrestricted access to all records and information, as well as to the audit committee, concur with this statement.
In addition, the directors have also reviewed the cash flow forecast for the year to 30 September 2020 and believe that the Barloworld group and company have adequate resources to continue in operation for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.
The financial statements were approved by the board of directors and were signed on its behalf by:
DB Ntsebeza DM Sewela Chairman Chief executive
NV Lila DG Wilson Group Finance Director Acting Chief Financial Officer
Sandton 15 November 2019
Preparer of financial statements FOR THE YEAR ENDED 30 SEPTEMBER 2019
These financial statements have been prepared under the supervision of RL Pole BCom, BComm, CA(SA).
RL Pole Group general manager: finance
Sandton 15 November 2019
6 7 Independent auditor’s report
TO THE SHAREHOLDERS OF BARLOWORLD LIMITED
Report on the Audit of the consolidated and separate Financial Statements
OPINION
We have audited the consolidated and separate financial statements of Barloworld Limited and its subsidiaries (the Group) set out on pages 18 to 133, which comprise the statements of financial position as at 30 September 2019, and the income statements and statements of other comprehensive income, the statements of changes in equity and the statements of cash flows for the year then ended, and the notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Group as at 30 September 2019, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group in accordance with the sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised January 2018), parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised November 2018) (together with the IRBA codes) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants International Code of Ethics for Professional Accountants (including International Independence Standards) respectively. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters apply to the consolidated financial statements and there is no key audit matter for the separate financial statements. KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN THE AUDIT GOODWILL AND INDEFINITE USEFUL LIFE INTANGIBLE ASSETS As disclosed in notes 11 and 12, the Group holds a goodwill and Our audit procedures included the following: indefinite useful life intangible asset balances of R61 million (2018: °° evaluating the design and testing the implementation of relevant R57 million) and R640 million (2018: R597 million) respectively controls relating to the calculation of the discounted cash flow; relating to the Botswana, Zambia, Angola, Mozambique and Malawi engaging our Corporate Finance specialists to assess compliance of (BZAMM) cash generating unit. °° the DCF in accordance with IAS 36; In accordance with IAS 36: Impairment of Assets (IAS 36), annual °° engaging our Corporate Finance specialists, to assess the impairment tests are conducted under the supervision of the directors assumptions used to calculate the discount rates and recalculating to assess the recoverability of the carrying value of goodwill and those rates; indefinite useful life intangible assets. °° assessing the reasonability of the projected growth rates against A discounted cash flow model (DCF) is used to assess the recoverability historical performance and external sources of information of both the goodwill and the indefinite useful life intangible assets as on growth projections for the region. We also assessed the disclosed in note 3 under the accounting policies. reasonableness of plans that management has included on cost reduction and working capital improvements; The complexity in calculating the discount rates, the judgement applied in estimating the growth rates as well as the value of the goodwill and °° performing sensitivity analyses on the valuations, increasing the indefinite useful life intangible assets makes the valuation of these discount rates and decreasing the growth rates and compared these balances a key audit matter. results with the carrying values of goodwill and indefinite useful life intangible asset; and The assumptions with the most significant impact on the cash flow assessing the adequacy of the Group’s disclosures in respect forecast are: °° of the goodwill and indefinite useful life intangible assets with °° the growth rate which is considered to be highly subjective as it is reference to IAS 36. based on historical experience and expectations; We concur with the directors’ conclusion that the assumptions used in °° cashflows from changes in working capital; and the DCF were reasonable and no impairment has been recorded. the discount rate which is a complex calculation performed by °° We consider the disclosures for goodwill and indefinite useful life independent experts for each cash generating unit (CGU), taking intangible assets to be appropriate. into consideration country or region-specific risk free rates.
8 9 Independent auditor’s report CONTINUED
KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN THE AUDIT PRESENTATION OF AVIS FLEET AS HELD FOR SALE The Directors have taken the decision to dilute their interest in the Our audit procedures included the following: Avis Fleet business from 100% to 50%. As at 30 September 2019, the Directors are confident that, based on the progress of this °° Evaluating the presentation of Avis Fleet in the consolidated financial transaction to date, the dilution to 50% will be executed in the next statements against the requirements of IFRS 5 in order to determine twelve months. whether the requirements of IFRS 5 had been met. This included obtaining an in‑depth understanding of the status of the sale as The funding arrangements for the sale has not been finalised and we at 30 September 2019 and inspecting supporting documentation consider this to be significant in the conclusion of this transaction. received from the Directors supporting Avis Fleet being held for sale; Consequently, the decision to hold this business as held for sale is a significant judgment by the Directors. °° Engaging our accounting specialists to review the analysis provided by the Directors to assess whether the requirements of IFRS 5 had The consolidated financial statements have been presented in been met; accordance with IFRS 5: Non-Current Assets Classified as Held for Sale and Discontinued Operations (IFRS 5). The results of Avis Fleet °° Performing audit procedures to ensure that the assets held for sale are presented as discontinued operations in the consolidated Income are carried at lower of carrying value and fair value less costs to sell Statement and related notes, including the restatement of the in terms of IFRS 5; and comparative financial information. The assets and liabilities of Avis Fleet Assessing the adequacy of the Group’s disclosures in respect in the consolidated statement of financial position are presented as °° held for sale. of the asset held for sale and discontinued operations with reference to IFRS 5. Due to the significant contribution which Avis Fleet makes to the We concur with the directors’ conclusion that Avis Fleet meets the Group, the judgement applied in classifying the business as held for sale as well as the importance of accurately and completely reflecting requirements of IFRS 5. We consider the disclosures of the assets held the remaining Barloworld business as a continuing operation, this has for sale and discontinued operations to be appropriate. been identified as a key audit matter.
Refer to note 20 where the disclosure relating to the non-current assets held for sale and discontinued operations is provided.
OTHER INFORMATION report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to The directors are responsible for the other information. The other report in this regard. information comprises the information included in the document titled “Barloworld Limited Annual Financial Statements for the year ended RESPONSIBILITIES OF THE DIRECTORS FOR THE 30 September 2019” which includes the Report of the Directors, the CONSOLIDATED AND SEPARATE FINANCIAL Audit, Governance and Risk Committee Report and the Company STATEMENTS Secretary’s Certificate as required by the Companies Act of South Africa, which we obtained prior to the date of this auditor’s report, The directors are responsible for the preparation and fair presentation and the Integrated Report, which is expected to be made available of the consolidated and separate financial statements in accordance to us after that date. The other information does not include the with International Financial Reporting Standards and the requirements consolidated and separate financial statements and our auditor’s report of the Companies Act of South Africa, and for such internal control thereon. as the directors determine is necessary to enable the preparation of Our opinion on the consolidated and separate financial statements consolidated and separate financial statements that are free from does not cover the other information and we do not and will not material misstatement, whether due to fraud or error. express an audit opinion or any form of assurance conclusion thereon. In preparing the consolidated and separate financial statements, the In connection with our audit of the consolidated and separate financial directors are responsible for assessing the Group’s and Company’s statements, our responsibility is to read the other information and, ability to continue as a going concern, disclosing, as applicable, in doing so, consider whether the other information is materially matters related to going concern and using the going concern basis inconsistent with the consolidated and separate financial statements of accounting unless the directors either intend to liquidate the Group or our knowledge obtained in the audit, or otherwise appears to be and/or company or to cease operations, or have no realistic alternative materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s but to do so. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF °° Evaluate the overall presentation, structure and content of the THE CONSOLIDATED AND SEPARATE FINANCIAL consolidated and separate financial statements, including the STATEMENTS disclosures, and whether the consolidated financial statements Our objectives are to obtain reasonable assurance about whether represent the underlying transactions and events in a manner that the consolidated and separate financial statements as a whole are achieves fair presentation. free from material misstatement, whether due to fraud or error, and °° Obtain sufficient appropriate audit evidence regarding the financial to issue an auditor’s report that includes our opinion. Reasonable information of the entities or business activities within the Group to assurance is a high level of assurance, but is not a guarantee that an express an opinion on the consolidated financial statements. We are audit conducted in accordance with ISAs will always detect a material responsible for the direction, supervision and performance of the misstatement when it exists. Misstatements can arise from fraud or group audit. We remain solely responsible for our audit opinion. error and are considered material if, individually or in the aggregate, We communicate with the Audit Committee regarding, among other they could reasonably be expected to influence the economic decisions matters, the planned scope and timing of the audit and significant of users taken on the basis of these consolidated and separate financial audit findings, including any significant deficiencies in internal control statements. that we identify during our audit.
As part of an audit in accordance with ISAs, we exercise professional We also provide the Audit Committee with a statement that we have judgement and maintain professional scepticism throughout the audit. complied with relevant ethical requirements regarding independence, We also: and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where °° Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to applicable, related safeguards. fraud or error, design and perform audit procedures responsive From the matters communicated with the Audit Committee, we to those risks, and obtain audit evidence that is sufficient and determine those matters that were of most significance in the audit appropriate to provide a basis for our opinion. The risk of not of the consolidated financial statements of the current period and detecting a material misstatement resulting from fraud is higher are therefore the key audit matters. We describe these matters in our than for one resulting from error, as fraud may involve collusion, auditor’s report unless law or regulation precludes public disclosure forgery, intentional omissions, misrepresentations, or the override of about the matter or when, in extremely rare circumstances, we internal control. determine that a matter should not be communicated in our report °° Obtain an understanding of internal control relevant to the audit because the adverse consequences of doing so would reasonably in order to design audit procedures that are appropriate in the be expected to outweigh the public interest benefits of such circumstances, but not for the purpose of expressing an opinion on communication. the effectiveness of the Group’s and Company’s internal control. REPORT ON OTHER LEGAL AND REGULATORY °° Evaluate the appropriateness of accounting policies used and the REQUIREMENTS reasonableness of accounting estimates and related disclosures made by the directors. In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that Deloitte & Touche has °° Conclude on the appropriateness of the director’s use of the going been the auditor of Barloworld Limited for one hundred and one years. concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated Deloitte & Touche and separate financial statements or, if such disclosures are Registered Auditor inadequate, to modify our opinion. Our conclusions are based on Per: Bongisipho Nyembe the audit evidence obtained up to the date of our auditor’s report. Partner However, future events or conditions may cause the Group and/or the Company to cease to continue as a going concern. 15 November 2019
10 11 Certificate by secretary
In my capacity as the company secretary, I hereby certify that, to the best of my knowledge and belief, Barloworld Limited has lodged with the Companies and Intellectual Property Commission all such returns and notices as are required of a public company in terms of the Companies Act 71 of 2008 (as amended). Further, I certify that such returns and notices are true, correct and up to date.
AT Andoni Company Secretary
15 November 2019 Audit Committee report FOR THE YEAR ENDED 30 SEPTEMBER 2019
The Audit Committee’s primary role is to EXTERNAL AUDIT for the company for the financial year assist the board to discharge its corporate ending 30 September 2020 in compliance governance and oversight responsibilities by THE AUDIT COMMITTEE with the Companies Act and the Listings ensuring the integrity of the group’s financial Requirements of the JSE Limited. Further °° Nominated and recommended to and corporate reporting, overseeing the shareholders that Deloitte & Touche details on this process are provided within execution of the groups combined assurance (Deloitte) be appointed as independent this report. model, and ensuring that adequate systems of external auditors for the company and °° Received confirmation from all external internal control are in place regarding financial its subsidiaries (excluding the Barloworld auditors that they are independent of risks and that these controls are operating Logistics group) and the appointment the group; effectively. of B Nyembe as the independent °° Concluded that the risk of familiarity The Audit Committee conducted its designated auditor for the company for between the external auditor and work in accordance with the written the financial year ending 30 September management was sufficiently mitigated; terms of reference approved by the 2019 in compliance with the Companies °° Considered the quality control processes Act and the Listings Requirements of the board (information on this is recorded in of the external auditors and specifically JSE Limited. Following the 2019 audit the Corporate Governance Report) and is audit quality reviews conducted over Deloitte have been the external auditors pleased to present its report in terms of the designated auditor, including those of Barloworld for 101 years and B Nyembe the King Code, the Companies Act and the performed by the Independent Regulatory has been the designated auditor for the Listings Requirements of the JSE (the Listing Board for Auditors (IRBA) as part of their past four years; Requirements) for the financial year ended routine review process; 30 September 2019. °° Nominated and recommended °° Considered and confirmed the proposed to shareholders of Barloworld external audit fees for each division and MEMBERSHIP Logistics Africa Proprietary Limited, a the group in consultation with group subsidiary of Barloworld Limited, that During the year under review the Audit management and approved the external SizweNtsalubaGobodo-Grant Thornton Committee consisted of: audit engagement letter; (SNG-GT) be appointed as independent °° SS Ntsaluba (Chairman) external auditors of the Barloworld °° Reviewed and approved the policy for non-audit services that can be provided °° N Dongwana (appointed 14 February 2019) Logistics business for the financial year ending 30 September 2019. Following the by external auditors and the pre-approval °° FNO Edozien (resigned 1 February 2019) 2019 audit SNG-GT have been the external authorisation process for these services that HH Hickey °° auditors for the Barloworld Logistics the external auditors may provide; and °° M Lynch-Bell business for two years; °° Considered to its satisfaction the NP Mnxasana. independence, objectivity and effectiveness °° °° In line with the requirement for external audit firm rotation we conducted a formal of the external auditors and ensured that Nine meetings were held in the year. Details process for the appointment of a new the scope of their additional (non-audit) of attendance are included in the integrated external auditor for the 2020 financial year services provided were, individually and in report available at www.barloworld.com. onwards. At the February 2020 Annual aggregate, in compliance with the group’s The Group Chief Executive Officer, Group General Meeting we will nominate policies in this regard. Refer to note 3 of Finance Director, Group Executive: Human and recommend to shareholders that the financial statements where fees paid to Capital, internal auditors, external auditors Ernst & Young (EY) be appointed as Deloitte are disclosed. and finance executives also attend meetings of independent auditors for the company, the Audit Committee as invitees. The internal with the arrangement of a shared and external auditors both have unrestricted audit with SNG-GT on a 70% EY: 30% access to the Audit Committee and regularly (SNG-GT) basis. We will also nominate and have confidential meetings without members recommend the appointment of S Sithebe of executive management being present. as the independent designated auditor
12 13 Audit Committee Report CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER 2019
ACCOUNTING PRACTICES AND KEY °° The sensitivity analysis performed by °° The adequacy of the disclosures made AUDIT MATTERS management over the value-in-use within note 20 to the financial statements The Audit Committee reviewed the calculation; and the classification of the Avis Fleet business as a discontinued operation; and accounting policies and the annual financial °° The adequacy of the disclosures made statements of the company and of the group in notes 11 and 12 to the financial °° The work and assurance of the for the year ended 30 September 2019, statements; and external auditor. for compliance with the provisions of the °° Considered the work and assurance of the On this basis the Audit Committee was Companies Act, IFRS and the JSE Listings external auditor. satisfied that the Avis Fleet business is Requirements, together with consideration of correctly classified as assets and liabilities held the findings from the JSE proactive monitoring On this basis the Audit Committee was for sale and a discontinued operation and of financial statements in 2018 and the satisfied that the goodwill and indefinite life that the disclosures presented in the financial preliminary findings of the JSE’s thematic intangibles allocated to the BZAMM CGU have statements are fairly presented and compliant review of IFRS 15: Revenue from Contracts sufficient headroom to support their carrying with IFRS. with Customers (IFRS 15) and IFRS 9: Financial value and that the disclosures presented in the financial statements are fairly presented Instruments (IFRS 9). KEY AREAS OF FOCUS in compliance with International Financial THE AUDIT COMMITTEE HAS Reporting Standards (IFRS). In addition to executing on its statutory duties CONSIDERED THE FOLLOWING and the considering key audit matters, the KEY AUDIT MATTERS DURING °° Presentation of Avis Fleet as held for Audit Committee also addressed the following THE FINANCIAL YEAR ENDED sale and discontinued operations 30 SEPTEMBER 2019: key areas of focus during the year ended As at 30 September 2019, management took 30 September 2019. °° Goodwill and indefinite life intangible a firm decision to dilute the group’s interest assets: Botswana, Zambia, Angola, in Avis Fleet to a 50% shareholding, with °° Combined assurance: External and Mozambique and Malawi (BZAMM) the aim to form a joint venture ownership internal auditor rotation structure in this business. In terms of The Audit Committee spent time The company undertook a formal process for International Financial Reporting Standards understanding the significant estimates the appointment of a new external auditor for (IFRS) 5 Non-current assets held for sale and judgements applied in management’s the 2020 financial year onwards. This process and discontinued operations, the group has valuation and impairment assessments consisted of the following key steps: reported the results of the Avis Fleet business and challenged these where necessary. inviting a number of audit firms to confirm separately as a discontinued operation and °° The Audit Committee assessed management’s their willingness to participate in the audit assets and liabilities held for sale. value-in-use calculations by considering, request for proposal; amongst others, the following: In assessing this position the Audit Committee °° determining selection criteria for the considered the following: °° The reasonableness of management’s evaluation of the audit firms; assumptions used in determining future °° The level of commitment demonstrated by °° interviewing and selecting potential lead cash flows; management to the transaction together audit partners from all tendering firms; and The terminal value and discount rates with the support of the board; °° °° receiving written and oral presentations applied in management’s value-in-use °° The reasonableness of management’s from the tendering audit firms. calculations and the sensitivity of assertion that the dilution is highly EY were determined the successful firm in this these assumptions to reasonably probable within 12 months; possible changes; process and have been appointed as the lead Whether the actions required to complete °° audit firm of the company and the group for The work of management’s the plan indicate that it is unlikely that °° 2020 and beyond. The audit will be a shared independent expert who assisted with the plan will be significantly changed audit with SNG-GT on a 70%:30% basis in the determination of the discount or withdrawn; 2020, with SNG-GT’s participation increasing rates applied by management in their over time in the anticipation of ultimately a value-in-use calculations; joint external audit from 2023 onwards. A similar process is currently underway °° Received and reviewed reports from both INTERNAL CONTROL for the appointment of a new co-sourcing internal and external auditors concerning Based on the results of the formal internal audit firm to support the existing the effectiveness of the internal control documented review of the group’s system Barloworld internal audit team. We expect environment, systems and processes as of internal controls and risk management this appointment to be concluded by March well as their concerns arising out of their conducted by internal audit function during of 2020. audits and requested appropriate responses the 2019 financial year and having given from management; °° New accounting standards due consideration to the results of assurance Reviewed the results of the financial In addition to IFRS 15 and 9, the Audit °° activities of various assurance providers control management self-assessments as Committee considered all new standards including considering information and contained in the Barloworld internal control applicable for the 2020 financial year, in explanations given by management and matrix which is completed in respect of all particular IFRS 16: Leasing and IFRIC 23: discussions with the external auditor on the business units and operations in the group; Uncertainty over income tax treatments as results of the audit, nothing has come to the well as interpretations and amendments to °° Reviewed and evaluated the nature and attention of the Audit Committee that caused standards in issue that are not yet adopted extent of the documented review of it to believe that the group’s system of internal but are likely to affect the financial reporting internal financial controls performed by controls and risk management is not effective in future years. The Audit Committee also internal audit and evaluated whether any and that the internal financial controls do reviewed the related disclosure thereof in the weaknesses identified in such financial not form a sound basis for the preparation of annual financial statements. controls were considered sufficiently reliable financial statements. material to be reported to the board and INTERNAL AUDIT the stakeholders; COMBINED ASSURANCE °° Reviewed the report prepared by internal The Audit Committee has reviewed the THE AUDIT COMMITTEE audit regarding the risk management company’s combined assurance model and process in the group and the level of °° Reviewed the appropriateness of the has satisfied itself with its completeness. internal audit charter and recommended embeddedness of such processes within Whilst the Risk and Sustainability Committee the approval of the charter by the board; each operating division; of the Board has the primary responsibility to Reviewed the group information security assist the Board with discharging its duties °° Approved the one-year operational internal °° in relation to the risk management, the audit work plan as well as the capacity policy and the results of the internal Audit Committee takes a keen interest in risk and resources within the internal audit self-assessments of the levels of control in management line with its responsibility for function to execute its work plan and place across the group; internal controls as they relate to financial monitored adherence of internal audit to °° Reviewed the results of divisional matters. its annual plan; and business unit disaster recovery self-assessments, the testing of such plans °° Monitored and supervised the functioning The Audit Committee has satisfied itself that and performance of internal audit, and the internal audit review of such the company has sufficient coverage obtained compliance with its charter and reviewed disaster recovery plans; from management, external and internal assurance providers to manage financial risks and approved the annual risk-based audit °° Reviewed the performance and confirmed plans, resources and budgets; the suitability and expertise of the group and the control environment. head of internal audit G Dimitriadis; and °° Reviewed the appropriateness of the considered the appropriateness of the EXPERTISE AND EXPERIENCE OF group’s combined assurance model to THE GROUP FINANCE DIRECTOR ensure that the significant risks identified expertise and adequacy of the resources of AND THE FINANCE FUNCTION in the high-level risk assessments are the group’s internal audit function; and adequately addressed; °° Nominated and recommended the THE AUDIT COMMITTEE appointment of MASA as a co-sourcing °° Reviewed the performance and confirmed partner to Barloworld’s existing internal the suitability and expertise of the Group audit function for the 2019 financial year. Finance Director, N Lila and DG Wilson
14 15 Audit Committee Report CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER 2019
(DG Wilson was the Group Finance Director °° Reviewed and recommended for adoption At their meeting held on 12 November 2019 until his retirement from the Board on by the board such financial information the Audit Committee recommended the 14 February 2019, after which he was in that is publicly disclosed which for the financial statements for the year ended the role of Acting Chief Financial Officer of year included: 30 September 2019 for approval to the board. the group until the appointment of N Lila °° The interim results for the six months on 1 August 2019). ended 31 March 2019; Considered the appropriateness of the °° °° The audited annual results for the year expertise, diversity and adequacy of ended 30 September 2019; and resources of the group’s financial function Reviewed the working capital packs and the effectiveness of the senior °° prepared by management to support members of management responsible for SS Ntsaluba the board’s going concern statement at the finance function. Audit Committee Chairman reporting dates as well as the solvency °° Was involved in the appointment of N Lila and liquidity tests required in terms of the For and on behalf of the Barloworld Limited who was appointed as the Group Finance Companies Act. Audit Committee Director on 1 August 2019 and who will be recommended for approval at the next FINANCIAL STATEMENTS AND 15 November 2019 annual general meeting of the company INTEGRATED REPORTING planned for February 2020. The Audit Committee considered the Barloworld Limited consolidated and company FINANCIAL STATEMENTS financial statements, and the summarised consolidated financial statements, (together THE AUDIT COMMITTEE the financial statements) for the year ended °° Considered accounting treatments, 30 September 2019. The Audit Committee, in significant or unusual transactions and conjunction with other Board sub-committees accounting judgements; has also considered the non-financial information as disclosed in the integrated °° Considered the appropriateness of accounting policies and any changes made; report and has assessed its consistency with operational and other information known Met separately with management, °° to Audit Committee members. The Audit external audit and internal audit and the Committee has also considered the assurance chairman attended the risk & sustainability provider’s report and is satisfied that the committee meetings; information is reliable and consistent with the °° Made appropriate recommendations to the financial results. The financial statements have board of directors regarding the corrective been prepared using appropriate accounting actions to be taken as a consequence of policies, which conform to International audit findings; Financial Reporting Standards. °° Reviewed the process in place for the reporting of concerns and complaints relating to accounting practices, internal audit, content of auditing of the group’s financial statements, internal controls of the group and any related matters. The Audit Committee can confirm that there were no such complaints during the year under review; Directors’ report FOR THE YEAR ENDED 30 SEPTEMBER 2019
NATURE OF BUSINESS R2.6 billion in the prior year (which included share (subject to South African Reserve the proceeds on disposal of Equipment Iberia). Bank approval). Barloworld Limited (“Barloworld” or “company”) is a registered holding company The consolidated and company financial Dividend declared Monday, 18 November 2019 for a group that is a distributor of leading statements are available on the company’s international brands providing integrated website, www.barloworld.com. Last day to trade Tuesday, rental, fleet management, product support cum dividend 7 January 2020 and logistics solutions. Barloworld comprises SHARE CAPITAL Shares trade Wednesday, businesses that fit the strategic profile 8 January 2020 The authorised share capital as at ex-dividend above, meet strict performance criteria and 30 September 2019: Record date Friday, demonstrate good growth potential. 400 000 000 ordinary par value shares of 10 January 2020 Barloworld maintains a primary listing on the R0.05 each. Payment date Monday, main board of the JSE Limited. The company 500 000 6% cumulative preference shares of 13 January 2020 also has secondary listings on the London and R2 each. The directors concluded that the company Namibia stock exchanges. The issued share capital as at 30 September would be both solvent and liquid subsequent The core divisions of the group comprise: 2019: to such dividend declarations. 212 692 583 ordinary par value shares of °° Equipment (earthmoving and CHANGES IN DIRECTORATE AND power systems); R0.05 each. EXECUTIVE MANAGEMENT 375 000 6% cumulative preference shares of °° Automotive (car rental, motor retail, R2 each. At the Annual General Meeting (AGM) on fleet services, used vehicles and 14 February 2019, Ms Sibongile Mkhabela disposal solutions); On 14 February 2019 the shareholders and Mr Isaac Shongwe retired as directors °° Logistics (logistics management and supply authorised the issue of 6 578 121 ordinary of the board. In line with a structured board chain optimisation); and shares to the Barloworld Foundation as nomination process, Ms Neo Mokhesi part of the Barloworld B-BBEE Transaction. and Mr. Hugh Molotsi were appointed as °° Corporate Office (group headquarters and Directors were authorised to buy back up treasury in Johannesburg, the treasury independent non-executive directors with to a maximum of 10% of issued shares of in Maidenhead (United Kingdom) and effect from 1 February 2019. the company, however, no shares have been a captive insurance company in the Isle bought back during the period under review. Ms Olufunke Ighodaro, the Finance Director of Man). designate resigned as a director of the MAJOR SHAREHOLDERS board effective 1 February 2019. Mr Donald FINANCIAL RESULTS Wilson, who retired as a member of the Shareholders holding beneficially, directly The following commentary reflects results board and finance director at the AGM, or indirectly, in excess of 3% of the issued from continuing operations. served as the acting Chief Financial Officer share capital of the company at 30 September until the appointment of Ms Nopasika Lila on Revenue of R56.8 billion 2019 is detailed on page 156 of the 1 August 2019. (2018: 60.1 billion) was down 5.4% from Integrated Report. the prior year. Operating profit for the With the resignation of Mr. Keith Rankin group was down 13.0% to R3 272 million DIVIDENDS effective 31 May 2019, Mr. Kamogelo (2018: R3 762 million), with the operating Mmutlana was appointed as the chief Details of the dividends and distributions margin declining from 6.3% to 5.8%. executive officer of the Automotive and declared and paid are shown below: Logistics divisions effective 1 June 2019. Total Headline Earnings Per Share (HEPS) of Final dividend number 180 of 297 cents Mr. Charl Groenewald was appointed as 1 100 was 92 cents (7.7%) below the HEPS of (gross) per ordinary share, together with divisional chief executive officer (CEO) for 1 192 in the prior year. a special dividend of 228 cents per Barloworld Logistics and a member of the The group generated a net cash inflow before Barloworld Executive Committee effective financing activities of R2.0 billion compared to 1 June 2019.
16 17 Directors’ report CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER 2019
Ms Hilary Wilton, Executive: Risk and During 2019 the Audit Committee insurance, retired at the end of May 2019. published a Request for Proposal for new auditors and nominated the appointment Advocate Dumisa Ntsebeza SC, who was of Ernst & Young as the new auditors for appointed to the board in May 1999 and the Company for financial year 2020, in as chairman of the board in June 2007, a shared arrangement with SNG-Grant will retire as a director and an independent Thornton. At the forthcoming AGM, chairman of Barloworld immediately after the shareholders will be requested to appoint next Annual General Meeting to be held on Ernst & Young as the registered independent 12 February 2020. external auditors of Barloworld Limited Mrs Neo Dongwana, who joined for the 2020 financial year and to confirm the board in May 2012, will succeed Mr S Sithebe, as the lead independent Advocate Dumisa Ntsebeza SC as the external auditor. chairman of the board with effect from 13 February 2020. Mrs Neo Dongwana ACQUISITIONS AND DISPOSALS currently chairs the remuneration committee During the year the company disposed and is a member of the audit committee, of 1.18% in NMI Durban South Motors nominations committee and the risk and Proprietary Limited (NMI) to reduce the sustainability committee. group’s shareholding to 50% and forming an The board wishes to thank the chairman, associate. as well as the executive- and non-executive directors for their valuable contribution to GOING CONCERN the company. The board welcomes the new The directors consider that the group chairman and directors and congratulates and company has adequate resources to them on their new roles. continue operating for the foreseeable future and that it is therefore appropriate to COMPANY SECRETARY AND adopt the going-concern basis in preparing REGISTERED OFFICE the consolidated and separate financial The company secretary is Ms Andiswa statements. The directors have satisfied Ndoni and her business address and that of themselves that the group and company are the registered office appear on the inside in a sound financial position and that they back cover. have access to sufficient borrowing facilities to meet foreseeable cash requirements. AUDITORS EVENTS AFTER THE Deloitte & Touche continued in office as REPORTING PERIOD auditors for the company and its significant subsidiaries. Barloworld continues to engage To the knowledge of the directors no material emerging and black-owned professional events have occurred between the statement service providers to drive diversity in its supply of financial position date and the date chain and provide them with access to the of approval of these financial statements broader market. SNG-GT performed the that would affect the ability of the users 2019 external audit for the Logistics division. of the financial statements to make proper evaluations and decisions. Accounting policies
DEFINITIONS The group has made the following accounting All financial information has been rounded to policy choices in terms of IFRS: the nearest million unless stated otherwise. Refer to pages 144 www.barloworld.com for a list of financial terms used in the °° Interest in associates and joint ventures are 3. JUDGMENTS AND ESTIMATES annual financial statements of Barloworld accounted using the equity method (policy MADE BY MANAGEMENT Limited (the Company) and consolidated note 15) Preparing financial statements in conformity financial statements. °° The cost model is applied in accounting for with IFRS requires estimates and assumptions property, plant and equipment and leased that affect reported amounts and related BASIS OF PREPARATION assets (policy note 12). disclosures. Actual results could differ from 1. ACCOUNTING FRAMEWORK these estimates. °° For elections made in applying The financial statements are prepared in IFRS 9 Financial Instruments and Accounting policies which have been accordance with International Financial IFRS 15 Revenue from contracts with identified as involving particularly complex Reporting Standards (IFRS) as issued by the Customers are included in note 33.1.3. or subjective judgements or assessments are International Accounting Standards Board, the °° All other accounting policies are as follows: SAICA Financial Reporting Guides as issued in line with International Financial by the Accounting Practices Committee, the Reporting Standards. REVENUE RECOGNITION Financial Pronouncements as issued by the 2. UNDERLYING CONCEPTS The percentage of completion method is Financial Reporting Standards Council and the applied to recognise revenue on long-term Companies Act of South Africa. The historical The financial statements are prepared on the maintenance and repair contracts (MARC) in cost convention is used except for certain going concern basis. the Equipment and Automotive businesses financial instruments that are stated at fair Assets and liabilities and income and expenses as performance obligations are satisfied over value. are not offset unless specifically permitted by time. Management exercises judgement in The basis of preparation is consistent an accounting standard. calculating the contract liabilities and contract with the prior year, except for new and assets which are based on the anticipated Financial assets and financial liabilities are revised standards and interpretations cost of repairs over the life cycle of the off-set and the net amount reported only adopted per note 33 to the financial equipment, or motor vehicles, applied to the when a legally enforceable right to set off the statements. Accounting policies, which are total expected future revenue arising from amounts exists and the intention is either to useful to users, especially where particular maintenance and repair contracts. For further settle on a net basis or to realise the asset and accounting policies are based on judgement detail refer to notes 2 for revenue, 18.2 for settle the liability simultaneously. regarding choices within International contract assets and 25.2 for contract liabilities Financial Reporting Standards, have EBITDA refers to Earnings before interest, of the annual financial statements. Detailed been disclosed. taxes, depreciation and amortisation. accounting policies have been disclosed in accounting policy note 6. Accounting policies for which no choice is Non-operating and capital items refer to permitted in terms of International Financial expenses/income that are unrelated to The significant assumption made to determine Reporting Standards have been included only Barloworld’s core operations and fall outside the stage of completion of contracts include: if management concluded that the disclosure the normal course of business. Items of °° Costs incurred to date to fulfil would assist users in understanding the income/expense included in non-operating the performance obligations for financial statements as a whole, taking into and capital items are consistent with items MARC contracts; account the materiality of the item being that are ‘out of’ (excluded from ) Headline Estimated costs to be incurred in discussed. Accounting policies which are Earnings Per Share (HEPS) in accordance with °° fulfilling the performance obligations for not applicable from time to time, have been the Listings Requirements of the JSE Limited MARC contracts; removed, but will be included if the type of and guidance published by the South African transaction occurs in future. Institute of Chartered Accountants relating °° Contract duration and mileage; to HEPS. °° Contract expiry date; °° Foreign currency movements;
18 19 Accounting policies CONTINUED
°° Parts price and labour inflation; and leasing as expressed by management this transaction as at the reporting date with the support of the board and as and any events subsequent to this date up °° Projected income stream, specifically for Automotive business. demonstrated by: to the time of issuing the annual financial the progress of this transaction as it statements. Within the Equipment business certain °° relates to securing funding (both debt There were no subsequent events sales are executed through sale and lease °° and equity); that would indicate the plan to arrangements with financial institutions, dilute the group’s interest in the whereby Barloworld sells the equipment to the °° an independent opinion on the deal Automotive leasing business would be financial institution and leases the equipment structuring which confirms that the significantly changed. back to Barloworld. In such transactions, proposed transaction structure achieves the performance obligation is satisfied when the deconsolidation objective of the The remaining assets classified as held for Barloworld and the financial institution sign transaction and that the structure sale relate to the Middle East and SmartMatta the certificate of delivery. In such transactions, results in the classification of Barloworld operations within the Logistics division payment is due on delivery. The group does remaining 50% interest as an equity and the Barlow Park property owned by not bear credit risk or any residual risk on accounted joint venture going forward; Barloworld Limited, which were classified as these leases and no bargain purchases exist °° the progress made in marketing to held for sale in prior year. For further detail, for the benefit of the group. Therefore, the and contracting with potential equity refer to note 20 included in the annual leases are classified as operating leases. These investors; and financial statements. arrangements result in the derecognition °° The completion of vendor due diligence IMPAIRMENT OF ASSETS of assets in instances where control over and independent business valuations the assets is assessed as having passed to which support the transaction price GOODWILL AND INTANGIBLE ASSETS the purchaser. being marketed to potential investors as Future cash flows expected to be generated reasonably in relation to the fair value of NON-CURRENT ASSETS HELD by the assets or cash-generating units are the business. FOR SALE AND DISCONTINUED projected, taking into account market OPERATIONS conditions and the expected useful lives of the °° The reasonableness of management’s assets. The present value of these cash flows, In September 2019, management took the assertion that the dilution is highly determined using an appropriate discount firm decision to dilute the group’s interest probable within 12 months of the decision rate, is compared to the current net asset in the Automotive leasing business to a to hold the business as held for sale as value and, if lower, the assets are impaired to 50% shareholding, with the ultimate aim demonstrated by: the present value. to form a joint venture ownership structure. °° the high level of interest shown in the Significant progress has been made towards transaction to date by potential external Cash flows which are utilised in these finalising the transaction structure such that investors under an active program to assessments are extracted from formal management are confident in completing this identify joint venture partners for this five-year business plans which are updated dilution within the next 12 months. As such transaction; and annually. The company utilises a discounted this business has been classified as assets cash flow valuation model to determine °° the fact that this business is considered and liabilities held for sale in the statement to be available for immediate sale with asset and cash-generating unit values of financial position. Given its significance to only administrative internal restructuring supplemented, where appropriate, by other the group, the Automotive leasing business and standard regulatory approvals valuation techniques. has also been disclosed as a discontinued required, which management do not For further details of management’s operation with the comparative income believe will result in delays in executing impairment assessments over goodwill statement restated to reflect this classification. the transaction beyond 12 months. and intangible assets refer to notes 11 and In assessing this position management have 12 included in the annual financial statements. °° Whether the actions required to complete considered the following: the plan indicate that it is unlikely that RECEIVABLES The level of commitment to the plan to the plan will be significantly changed or °° The group calculates the allowance for credit dilute Barloworld’s interest in Automotive withdrawn by assessing the progress of losses based on the expected credit loss (ECL) model to assess whether financial assets ASSET LIVES AND RESIDUAL VALUES obligations from the sale of the goods it measured at amortised cost, finance lease Property, plant and equipment with the relates to. receivables and contract assets collectively exception of Equipment and Automotive Within the Equipment and Automotive referred to as receivables are impaired. rental/fleet assets are depreciated over its divisions warranties are provided on certain useful life taking into account residual values, In determining the ECL, receivables are equipment based on warranties supplied by where appropriate. grouped based on similar risks, the industry the OEMs (original equipment manufacturers) in which the debtor operates, the regulatory The actual lives and usage of the assets for spare parts and service supplied to environment, the size of the debtor and the and residual values are assessed annually customers. Management exercises judgement historical payment history of the debtor. ECLs and may vary depending on a number of in establishing provisions required on the are calculated using a provision matrix which factors. In reassessing asset lives and usage, basis of claims notified and past experience. applies a historic loss ratio to the aged balance factors such as technological innovation, For further detail refer to note 23 included in of trade receivables at each reporting date. product life cycles and maintenance the annual financial statements. In instances where there was no evidence of programmes are taken into account. Residual CONTRACT LIABILITY historical write-offs, management judgement value assessments consider issues such as A contract liability for Automotive and is applied to assess for potential credit losses. future market conditions, the remaining life of Equipment to incur contractual costs of The ECL is built using the historic loss ratio the asset and projected disposal values. adjusted for forward-looking information service, maintenance and warranty work to (refer to the policy on impairment of financial Short term car rental fleets are depreciated be carried out in the future and the unearned assets in note 18) to determine the lifetime to guaranteed residual value or by 20% margin to be recognised over the life of the ECL for the portfolio of trade receivables. per annum where no residual values have plans is recognised. Actuarial experts are used been guaranteed. to determine the inputs required to establish DEFERRED TAXATION ASSETS the adequacy of the liability and the resulting POST-EMPLOYMENT BENEFIT OBLIGATIONS Deferred tax assets are recognised to the revenue to be recognised and the final liability. extent it is probable that taxable income will Actuarial valuations are based on assumptions This valuation takes into account the future be available in future against which they can which include employee turnover, mortality usage; maintenance, tyres and service costs of be utilised. rates, the discount rate, the expected each vehicle projected based on the estimated long-term rate of return of retirement plan future usage and the experience adjusted Five-year business plans are prepared annually assets, healthcare inflation cost and rates of maintenance tables. Funds for which there are and approved by the boards of the company increase in compensation costs. insufficient claims history are recognised in and its major operating subsidiaries. These profit and loss to the extent of the claims cost plans include estimates and assumptions Judgement is exercised by management, incurred without any profits being attributed. regarding economic growth, interest rates, assisted by advisors, in adjusting mortality inflation and competitive forces. rates to take account of actual mortality rates At the end of the plan, any remaining profits within the schemes. are recognised in profit and loss. When these The plans contain profit forecasts and cash contracts contain a significant financing flows and these are utilised in the assessment PROVISIONS component, the transaction price is adjusted of the recoverability of deferred tax WARRANTY CLAIMS PROVISION for the financing component and the assets. Refer to note 11 for the inputs used in financing component is recognised separately the assessment. Warranties are provided on certain equipment, spare parts and services supplied to as financing income over the life of the plan. Management also exercises judgement in customers. Management exercises judgement COMMITMENTS AND assessing the likelihood that business plans in establishing provisions required on the basis CONTINGENCIES ON RISK SHARE will be achieved and that the deferred tax of claims notified and past experience. AGREEMENTS – EQUIPMENT assets are recoverable. SOUTHERN AFRICA AND Provisions for warranty costs are recognised EQUIPMENT RUSSIA In certain circumstances further corroborative at the date of sale of the relevant products, evidence is used, such as tax planning at the estimated expenditure required to Our equipment businesses, as part of the opportunities within the control of settle the group’s obligation. Warranties have ordinary course of business, have entered management, to support the recovery of the not been identified as distinct performance into a risk sharing arrangements with certain tax asset.
20 21 Accounting policies CONTINUED
Caterpillar subsidiaries (financing arms of °° Returnable and non-returnable; and INVESTMENTS IN ASSOCIATES AND JOINT VENTURES Caterpillar) in terms of which Barloworld will °° Rebuilt components. fund a certain percentage of losses suffered by The company has investments in associates Caterpillar in the event that certain higher risk Obsolete, slow-moving and damaged and joint ventures in which it holds 50% customers default on their commitments. inventories are identified for each parts equity interests. These investments are category. Returnable slow moving parts are not controlled because the company does These guarantees will result in the recognition reduced to the net realisable value based not have the power to direct the relevant of a liability, represented by an expected credit on inventory turns and by applying a sliding activities, which are decided through majority loss, in the statement of financial position provisioning scale. vote of the board. The results of these to the extent that the underlying customer investments are equity accounted. defaults on their obligations to Caterpillar. Automotive inventory consists of new, used A customer is considered to have defaulted and demo vehicles as well as and parts stock. FUNCTIONAL CURRENCIES when they have not met their contractual The net realisable value of all used, demo and The US dollar has been selected as the obligations for payment due to Caterpillar. parts stock is assessed at every reporting date functional currency for the group’s operations Where there is no expected credit loss on the taking into account the ageing, condition and across the majority of the African territories underlying customers for which Barloworld the current market demand for such items. and in Russia. A combination of factors is has issued a guarantee, these are disclosed considered in coming to this conclusion. These as contingent liabilities in the financial CLASSIFICATION OF FINANCIAL included the assessment of the economic LIABILITIES statements coupled with disclosure of the environment where the operations are The Automotive and Equipment businesses collateral held against this contingent liability located, the currency that most influences the utilise floor plan and trade financing facilities (refer to note 29). A financial liability was cost of goods and the pricing decisions and to efficiently manage working capital flows. recognised in the current year and included the relative stability of the local currencies in Judgement is exercised regarding whether in other payables, based on the probability of these territories. default of 9.07%, which was determined as these arrangements constitute trade payables 4. FOREIGN CURRENCIES the number, default events that occurred over or debt. Factors considered include the currency in which the financing arrangements the total population of receivables and applied The financial statements of entities within are settled, the repayment terms of the to the portfolio of receivables concerned. the group whose functional currencies are facilities relative to standard supplier payment different to the group's presentation currency, terms and the existence of breakage costs on RISK SHARE AGREEMENTS – BWE which is South African Rand, include the these facilities. To ensure comparability and PROVISION FOR NET REALISABLE VALUE following significant currencies: OF INVENTORY consistency, current industry practices are also considered as part of this determination. °° US Dollar Equipment inventory consists of machines, These floor plans are classified as payables British Pound parts and work-in-progress. °° (interest bearing) as presented noted in °° Euro Machine inventory is reviewed by country and note 25. Russian Ruble by machine model taking into account the °° INTERESTS IN TRUSTS aging, market demand and condition of the °° Angolan Kwanza machine to determine the net realisable value. The trust established to hold the shares awarded in the black economic empowerment Refer to the consolidated summary in other Parts inventory is categorised as follows: transaction to the education entity is currencies at the back of these consolidated considered to be controlled by the company financial statements for the exchange rates °° Strategic parts with longer lead times due to the majority representation on the (spot and average rates). or parts required to support new board of trustees, which has the power machine models; to direct relevant activities of the trust. Non-strategic parts that are generally faster °° Accordingly, the assets and liabilities and the moving parts; results of this trust have been consolidated °° Perishable parts with a limited shelf life; since the date of the transaction. °° Remanufactured components; CONSOLIDATED FINANCIAL RUSSIA (RUS) In accordance with IFRS 15 Revenue from STATEMENTS Contracts with Customers, Barloworld has The Russian segment includes the elected to apply the practical expedient by 5. OPERATING SEGMENTS following operation: considering a portfolio of contracts with The Executive Committee, as chief operating °° Equipment customers and performance obligations with decision maker, has determined the operating similar characteristics as specified above. segments based on the information it This RUS segment delivers construction uses to allocate resources and assess and mining equipment to the earthmoving SALE OF GOODS AND PARTS segmental performance. industries across Russia. The sale of goods and parts includes: New and used Caterpillar earthmoving Segments are analysed by operating activities EUROPE °° and geographical regions. equipment, engines and other The Europe segment includes the complementary products, lift trucks, No operating segments have been aggregated following operation: warehouse handling equipment and in arriving at the reportable segments of the associated agricultural equipment °° Corporate group as presented in note 1. (Equipment and Handling); This Corporate Office primarily comprises the Management evaluates the segment °° New, used and demo motor retailing operations of treasury in Maidenhead and the performance based on the operating (Automotive); and captive insurance company. results plus any other items that are directly °° recyclables and fast-moving consumer attributable to segments including fair value INCOME STATEMENT goods (Logistics). adjustments on financial instruments. Interest costs are excluded due to the centralised 6. REVENUE Performance obligations from the sale of nature of the group’s treasury operations. goods and parts are satisfied at a point in The group recognises revenue from the time. The point of delivery is where control The activities of the group’s operating following major sources: over the goods is transferred to the customer segments are described below: and therefore the performance obligation is °° Sale of goods and parts (new and used) satisfied. Payment is then due as follows: SOUTHERN AFRICA (SA) °° Sale of services and maintenance Sales of new vehicles – ranges from cash Rendering of services °° The SA segment includes the °° on delivery to 30 days of invoice date; following operations: °° Rental income °° Sales of used vehicles – ranges from cash °° Commission income on delivery to 30 days of invoice date; °° Equipment and Handling Revenue from contracts with customers is Sales of new parts – ranges from cash on This segment delivers construction and mining °° recognised when the performance obligations delivery to 90 days of invoice date; equipment to the earthmoving industry. for the transfer of goods and services are °° Sales of used parts – ranges from cash on °° Automotive and Logistics satisfied, this maybe over time or at a point delivery to 90 days of invoice date; in time, in the above major revenue sources. The Logistics division of this segment includes Sales of new equipment – cash on delivery Revenue is recognised at the amount of °° supply chain solutions to a wide variety of for construction machines and 7 days from the transaction price that is allocated to the industries. The Automotive division of this commissioning for mining machines; and specific performance obligations. The revenue segment comprises of the following world is disaggregated based on the type of °° Sales of used equipment – cash on class business units; Avis and Budget Rent a revenue. See note 2. delivery unless financed under instalment Car, Avis Fleet, and Motor Trading. sale agreement. Revenue represents the invoiced amounts °° Corporate excluding those earned on behalf of others, RENDERING OF SERVICES This Corporate Office primarily comprises the value-added tax or the amount measured Revenue from providing services includes: operations of the group headquarters and using the percentage of completion, except °° Workshop, in-field support services and treasury in Johannesburg. for rental income which is recognised on a after sales services including equipment straight-line basis. services, fitment and repairs (Equipment and Handling);
22 23 Accounting policies CONTINUED
°° After sales services including vehicle CONTRACT ASSET 7. EMPLOYEE BENEFIT COSTS services, fitment and repairs (Automotive); A contract asset is recognised within The cost of providing employee benefits is and Equipment and Logistics when performance accounted for in the period in which the °° Logistics services and supply chain obligations (contractual maintenance and benefits are earned by employees. management solutions (Logistics). repair services) are gradually satisfied over time, for which revenue is recognised, and The cost of short-term employee benefits is Revenue from rendering services is long term the customer has not been billed. The amount recognised in the period in which the service is in nature and is recognised over the life of the recognised as revenue is measured by applying rendered and is not discounted. plan in the accounting period in which the the percentage of completion method services are rendered (over time). The expected cost of profit-sharing and bonus previously described. The contract asset is payments is recognised as an expense when The percentage of completion (output) derecognised when the customer is invoiced there is a legal or constructive obligation method, based on the costs incurred to date and a trade receivable is recognised with the to make such payments as a result of past as a percentage of total estimated costs to be difference between the contract asset and performance and a reliable estimate of the incurred to fulfil the performance obligations, trade receivable recognised as revenue or an obligation can be made. is applied to recognise revenue on long-term impairment loss. maintenance and repair contracts (MARC) in 8. FINANCE COSTS RENTAL INCOME (PRESENTED AS PART OF the Equipment and Automotive businesses REVENUE) Interest on financial liabilities measured as a result of the performance obligations Rental income: rental of Caterpillar at amortised costs is calculated using the being satisfied over time. This method best earthmoving equipment, engines and other effective interest rate method. depicts the transfer of services to customers complementary products (Equipment and as the costs incurred to date are indicative of Payments relating to capitalised finance Handling); fleet management solutions and the group’s satisfaction of the performance lease liabilities are accounted for in terms short-term vehicle rentals (Automotive). obligations under revenue contracts with of IAS 17 based on calculated Internal its customers. Rental income from operating leases (net Rate of Return (IRR). For further detail of any incentives given to the lessees) is refer to note 5 included in the annual The amount to be recognised as revenue recognised on a straight-line basis over the financial statements. over-time is determined by taking the total lease term. expected revenue from the fulfilment of the 9. INCOME FROM INVESTMENTS COMMISSION INCOME obligations multiplied by the percentage Interest income is accrued on a time basis on of completion. The group is an agent, and earns commission financial assets measured at amortised costs income, in the sale and auctioning of As part of the MARC contracts the group using the effective interest method. goods through Automotive and sales and receives monthly instalments from customers clearing of goods through Logistics. In these 10. TAXATION for the duration of the contract towards arrangements, the group does not recognise the maintenance and repair services to be The charge for current taxation is based on the gross amount as revenue but only the performed in future. the results for the year as adjusted for income fee consideration it expects to be entitled that is exempt and expenses that are not CONTRACT LIABILITY to. Commission income is recognised at deductible using tax rates that are applicable A contract liability is recognised within the point the sale when the performance to the taxable income. the Equipment division on receipt of the obligation which gives rise to the commission Deferred taxation is recognised in profit or instalment or upfront payments, before income is satisfied. loss except when it relates to items credited performance obligations are satisfied, which is Revenue from contract with customers or charged to other comprehensive income, released to the income statement as revenue for the group contain no significant in which case it is also recognised in other as the related performance obligations are financing component. comprehensive income. satisfied and is non-refundable. The amount recognised as revenue is determined through For further detail refer to note 2 included in a valuation performed internally. the annual financial statements. STATEMENT OF FINANCIAL Goodwill is stated at cost less impairment statements of associates and joint ventures are POSITION losses and is not amortised. used, which are all within three months of the year-end of the group. Adjustments are made 11. INTEREST IN SUBSIDIARIES 14. INTANGIBLE ASSETS to the associate’s or joint ventures financial Investments in subsidiaries are measured at Intangible assets are initially recognised at results for material transactions and events in cost. cost if acquired separately or at fair value if the intervening period. acquired as part of a business combination. 12. PROPERTY, PLANT AND 16. DEFERRED TAXATION ASSETS EQUIPMENT (PPE) The following methods and rates were AND LIABILITIES Items of property, plant and equipment are used during the year to amortise the Deferred taxation is recognised using the stated at cost less accumulated depreciation intangible assets: financial position liability method for all and impairment losses. Capitalised Straight line 2 to 7 years temporary differences, unless specifically exempt, at the tax rates that have been The methods of depreciation, useful lives and software enacted or substantially enacted at the residual values are reviewed annually. Patents Straight line 10 years financial position date. Trademarks Straight line 10 to 20 years The following methods and rates were used Customer A deferred taxation asset represents the during the year to depreciate property, plant relationships Straight line 5 to 6 years amount of income taxes recoverable in future and equipment to estimated residual values: Supplier Indefinite periods in respect of deductible temporary relationships useful life N/A Buildings Straight line 20 to 50 years differences, the carry forward of unused tax Supplier relationships are measured initially at losses and the carry forward of unused tax Plant Straight line 5 to 35 years fair value as part of a business combination. credits. Deferred taxation assets are only Vehicles Straight line 5 to 10 years recognised to the extent that it is probable Supplier relationships are separately Equipment Straight line 5 to 10 years that taxable profits will be available against identifiable intangible assets from distribution Furniture Straight line 3 to 15 years which deductible temporary differences can agreements with suppliers specifying sales Equipment be utilised. rental assets Usage 2 to 5 years objectives, territory presence and service levels to be provided. Supplier relationships have A deferred taxation liability represents the Assets held under finance leases are been assessed as having indefinite useful lives amount of income taxes payable in future depreciated over their expected useful lives or and are tested for impairment annually. Refer periods in respect of taxable temporary the term of the relevant lease, where shorter. to note 12 for further details. differences. Deferred taxation liabilities are Vehicle rental fleets are accounted for as part recognised for taxable temporary differences, Customer relationships are measured initially of property, plant and equipment but due to unless specifically exempt. at fair value as part of a business combination. the short-term nature of the assets, the net Deferred taxation assets and liabilities are not book value is reflected under current assets in Development costs are capitalised only recognised if the temporary difference arises the statement of financial position. when and if it results in an asset that can be from goodwill or from the initial recognition identified, it is probable that the asset will (other than in a business combination) of 13. GOODWILL generate future economic benefits and the other assets and liabilities in a transaction that Goodwill represents the future economic development cost can be reliably measured. affects immediately neither taxable income benefits arising from assets that are not Otherwise development costs are recognised nor accounting profit. in profit or loss. capable of being individually identified Deferred taxation arising on investments in and separately recognised in a business 15. INTERESTS IN ASSOCIATES subsidiaries, associates and joint ventures is combination and is determined as the excess AND JOINT VENTURES recognised except where the group is able of the cost of acquisition over the group’s to control the reversal of the temporary Associates and joint ventures are measured interest in the net fair value of the identifiable difference and it is probable that the assets, liabilities and contingent liabilities using the equity method of accounting, temporary difference will not reverse in the of the subsidiary, associate or joint venture applying the group’s accounting policies, from foreseeable future. recognised at the date of acquisition. the acquisition date to the disposal date. The most recent audited annual financial Deferred taxation assets and liabilities are offset when there is a legally enforceable
24 25 Accounting policies CONTINUED
right to offset current taxation assets against °° Bank overdrafts; financial asset has increased significantly since current taxation liabilities and it is the initial recognition. °° Derivatives; intention to settle these on a net basis. °° Trade and other payables; and Credit risk is considered to have significantly The group has companies where deferred increased when supportable information °° Other non-current liabilities. taxes are recognised for temporary such as inflation, the debtors' reputation and differences that arise when an entity’s CLASSIFICATION OF FINANCIAL ASSETS financial position, the market the debtors' taxable profit or loss (and thus the tax basis The group classifies financial assets into the operates in, the impact of technology and, of its non-monetary assets and liabilities) following categories: particularly in relation to our Equipment are measured in a currency different that its debtors', local economic and geopolitical °° Fair value through profit or loss (FVTPL); functional currency. Changes in the exchange indicators and commodity prices available to Amortised cost (AC); and rate result in a deferred tax asset or liability °° the group indicate that the financial asset which is charged to profit and loss. °° Fair value through other comprehensive would not be recoverable as contracted. income (FVTOCI). 17. INVENTORIES For financial assets where the group Financial assets are classified based on how determines that recoverability is unlikely, Inventories are diverse and materially consist their performance is managed and evaluated such that the credit quality has significantly of the following: (business model), and the characteristics of deteriorated and the assets are credit °° Finished goods which include vehicles their contractual cash flows. impaired, a life-time expected credit loss is and machines; Financial assets and classified and recognised and interest income only accrues °° Work in progress relating to above subsequently measured as follows: on the net amount (gross carrying amount mentioned finished goods; and less credit impairment). Default is considered Measurement to have occurred when a customer does not °° Merchandise such as parts, etc. Financial asset category meet their contractual payment obligations. Derivatives FVTPL Specific identification basis is used to arrive at Financial assets are credit impaired when the the cost of items that are not interchangeable. Trade and other receivables (excl. prepayments) AC group has not received contractual cash flows Otherwise the first-in-first-out method or Debt instruments AC as contracted, efforts to recover the asset weighted average method for certain classes Cash and cash equivalents AC have not been successful and the customer's of inventory is used to arrive at the cost of ability to pay is questionable. Where the Investment in equity items that are interchangeable. securities FVTOCI group determines there are no prospects of a customer meeting its contractual repayments, Rental assets that become available for sale Financial assets and classified and the related receivable is written off, and this after being removed from rental fleets are subsequently measured as follows: transferred to inventories (policy note 12) at occurs when the customer is handed over to their carrying amount. Sale proceeds from All financial liabilities, excluding derivative legal for collection. liabilities, are subsequently measured at such rental assets are recognised as revenue in The group recognises a loss allowance as a amortised cost using the effective interest accordance with policy note 6. life-time expected credit loss on: method. Derivative liabilities are subsequently 18. FINANCIAL ASSETS AND measured at fair value through profit or loss. °° Trade receivables and contract assets due FINANCIAL LIABILITIES to their short-term nature and have no (FINANCIAL INSTRUMENTS) IMPAIRMENT OF FINANCIAL ASSETS significant financing component; and The group recognises a loss allowance for The group’s financial instruments comprise: °° Finance lease receivables as an accounting expected credit losses on financial assets policy choice. °° Investments in equity securities; measured at amortised cost. The recoverability °° Loans receivable; of a financial asset is determined from the The group reassesses the life-time expected credit losses at each reporting period and °° Trade and other receivables date it is recognised with a loss allowance (excluding prepayments); recognised for expected losses determined at recognises any changes as an impairment gain initial recognition. The group measures the or loss. °° Cash and cash equivalents; loss allowance at an amount equal to the Borrowings; °° life-time expected losses if credit risk on the 19. POST-EMPLOYMENT BENEFIT of plan assets. Any asset is limited to the IN THE CAPACITY OF A LESSEE OBLIGATIONS unrecognised actuarial losses, plus the present The majority of finance leases are entered value of available refunds and reductions in It is the policy of the group to encourage, into as lessee for land and buildings, motor future contributions to the plan. facilitate and contribute to the provision vehicles and rental fleets. For further detail of retirement benefits for all permanent refer to notes 22 and 28 included in the TRANSACTIONS AND EVENTS employees. To this end the group's permanent annual financial statements. employees are usually required to be members 20. HEDGE ACCOUNTING of either a pension or provident fund, 22. SHARE-BASED PAYMENTS Foreign currency and interest rate hedging depending on their preference and local legal EQUITY SETTLED SHARE OPTIONS instruments are used to manage the group’s requirements. The group also guarantees a currency and interest rate exposures. Details Executive directors and senior executives have funded defined benefit scheme for qualifying of the Group’s risk management policies and been granted equity settled share options in employees in the United Kingdom. practices are outlined in note 31. terms of the Barloworld Share Option Scheme. Payments to defined contribution plans After the date on which the options are All hedging relationships are designated as are recognised as an expense as they fall exercisable and before the expiry date: cashflow hedges. If these cash flow hedge due. Payments made to industry-managed meet the conditions for hedge accounting The options can be exercised to purchase retirement benefit schemes are dealt with as the portion of the gain or loss on the shares for cash in which event the shares defined contribution plans where the group’s hedging instrument that is determined to issued are accounted for in share capital obligations under the schemes are equivalent be an effective hedge is recognised in other and share premium at the amount of the to those arising in a defined contribution comprehensive income and the ineffective exercise price. retirement benefit plan. portion is recognised in profit or loss. A hedge FORFEITABLE SHARE PLAN The cost of providing defined benefits is of the foreign currency risk of a firm Executive directors and senior executives have determined using the projected unit credit commitment is designated and accounted for been granted equity settled shares in terms method. Valuations are conducted every as a cash flow hedge. When the transaction of the Barloworld Forfeitable Share Plan (FSP). three years and interim adjustments to those that gave rise to a firm commitment is Equity settled share based payments are valuations are made annually. recognised, the reserve is derecognised and measured at fair value (excluding the effect capitalised to the item. Actuarial gains and losses are recognised of non market-based vesting conditions) at immediately in the statement of other 21. LEASING the date of grant and recognised in profit or comprehensive income. loss on a straight-line basis over the vesting CLASSIFICATION period, based on the estimated number of Gains or losses on the curtailment or shares that will eventually vest and adjusted settlement of a defined benefit plan are Leases are classified as finance leases or for the effect of non-market-based vesting recognised in profit or loss when the group is operating leases at the inception of the lease. conditions. Fair value is measured using a demonstrably committed to the curtailment Leases where the group has substantially binomial pricing model. or settlement. all the risks and rewards of ownership are classified as finance leases. Past service costs are recognised in profit EQUITY SETTLED SHARE APPRECIATION RIGHTS and loss immediately to the extent that the IN THE CAPACITY OF A LESSOR Equity settled share appreciation rights have benefits are already vested. Otherwise they been granted to employees in terms of the are amortised on a straight-line basis over the Long term vehicle fleet is leased to customers Barloworld Share Appreciation Rights scheme average period until the amended benefits for periods ranging from 24 to 60 months as (SAR). Equity settled share based payments are become vested. finance leases. For further detail refer to policy note 18 for impairment of lease receivables measured at fair value (excluding the effect The amount recognised in the statement and notes 14 and 18 included in the annual of non-market-based vesting conditions) at of financial position represents the present financial statements. the date of grant and recognised in profit or value of the defined benefit obligation loss on a straight-line basis over the vesting as adjusted for the unrecognised past period, based on the estimated number of service costs and reduced by the fair value
26 27 Accounting policies CONTINUED
shares that will eventually vest and adjusted 25. CLASSIFICATION OF CASH for the effect of non-market-based vesting FLOW ACTIVITIES conditions. Fair value is measured using a For the purposes of the cash flow statement binomial pricing model. the following are classified as operating
CASH SETTLED SARS AND FSPS activities due to the nature of the segments they relate to: Cash settled share appreciation rights and FSPs granted to employees for services rendered °° Net Investment in Car Rental Vehicles; and or to be rendered are raised as a liability and °° Net Investment in Fleet and Rental Assets. recognised in profit or loss immediately or, if vesting requirements are applicable, over the vesting period. The liability is measured annually until settled and any changes in value are recognised in profit or loss.
Fair value is measured using a binomial pricing model.
For further detail refer to notes 22 and 28 included in the annual financial statements.
23. INSURANCE CONTRACTS
An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Certain transactions within maintenance contracts in equipment and automotive divisions are entered into as insurer which falls within the definition of insurance contracts per IFRS 4 Insurance Contracts. For further detail refer to note 30 included in the annual financial statements.
24. FINANCIAL GUARANTEE CONTRACTS
The group regards financial guarantee contracts as insurance contracts and uses accounting applicable to insurance contracts. Details regarding financial guarantees issued are disclosed under contingent liabilities. Consolidated income statement FOR THE YEAR ENDED 30 SEPTEMBER
Restated* 2019 2018 Notes Rm Rm
CONTINUING OPERATIONS Revenue 2 56 834 60 094 Operating profit before items listed below 5 145 5 536 Impairment losses on financial assets and contract assets 18 (124) Depreciation (1 561) (1 634) Amortisation of intangible assets (115) (140) Operating profit before B-BBEE transaction charge 3 345 3 762 B-BBEE transaction charge (73) Operating profit 3 3 272 3 762 Fair value adjustments on financial instruments 4 32 (122) Finance costs 5 (1 085) (1 145) Income from investments 6 192 140 Profit before non-operating and capital items 2 411 2 635 Non-operating and capital items 7 87 (248) Profit before taxation 2 498 2 387 Taxation 8 (771) (870) Profit after taxation 1 727 1 517 Income from associates and joint ventures 13 231 235 Profit for the year from continuing operations 1 958 1 752 DISCONTINUED OPERATIONS Profit from discontinued operations 20 519 2 168 Profit for the year 2 477 3 920
Attributable to: Owners of Barloworld Limited 2 428 3 846 Non-controlling interests in subsidiaries 49 74 2 477 3 920
Earnings per share from group (cents) – basic 9 1 150.2 1 823.8 – diluted 9 1 146.9 1 812.9
Earnings per share from continuing operations (cents) – basic 9 907.2 801.9 – diluted 9 904.6 797.1
Earnings per share from discontinued operation (cents) – basic 9 243.0 1 021.9 – diluted 9 242.3 1 015.8
* The restatement is due to discontinued operations of Avis fleet and Iberia (refer to note 20)
28 29 Consolidated statement of other comprehensive income FOR THE YEAR ENDED 30 SEPTEMBER
2019 2018 Rm Rm
Profit for the year 2 477 3 920 Items that may be reclassified subsequently to profit or (loss): 553 (874) Exchange gain on translation of foreign operations 527 645 Translation reserves realised on disposal of subsidiaries (1 502) Gain/(loss) on cash flow hedges 32 (23) Deferred taxation on cash flow hedges (6) 6 Items that will not be reclassified to (loss) or profit: (488) 345 Actuarial (losses)/gains on post-retirement benefit obligations (588) 415 Taxation effect of net actuarial losses 100 (70) Other comprehensive income/(loss) for the year, net of taxation 65 (529) Total other comprehensive income for the year 2 542 3 391 Total other comprehensive income attributable to: Barloworld Limited shareholders 2 493 3 317 Non-controlling interest* 49 74 2 542 3 391
* Non-controlling interest includes R6 million (2018: R13 million) related to discontinued operations. Consolidated statement of financial position AT 30 SEPTEMBER
2019 2018 Notes Rm Rm
ASSETS Non-current assets 14 540 19 231 Property, plant and equipment 10 7 879 12 657 Goodwill 11 1 408 1 873 Intangible assets 12 1 527 1 528 Investment in associates and joint ventures 13 2 253 1 343 Finance lease receivables 14 2 211 Long-term financial assets 15 710 909 Deferred taxation assets 16 761 710 Current assets 26 871 29 531 Vehicle rental fleet 10 3 137 3 058 Inventories 17 8 072 9 592 Trade and other receivables 18.1 7 384 8 883 Contract assets 18.2 981 Taxation 71 105 Cash and cash equivalents 19 7 226 7 893 Assets classified as held for sale 20 5 780 497 Total assets 47 191 49 259
EQUITY AND LIABILITIES Capital and reserves Share capital and premium 21 441 441 Other reserves 4 523 4 194 Retained income 18 659 17 598 Interest of shareholders of Barloworld Limited 23 623 22 233 Non-controlling interest 272 517 Interest of all shareholders 23 895 22 750
Non-current liabilities 7 336 8 917 Interest-bearing 22 4 621 5 995 Deferred taxation liabilities 16 356 632 Provisions 23 102 47 Other non-current liabilities 24 2 257 2 243 Current liabilities 13 738 17 466 Trade and other payables 25.1 9 363 11 122 Contract liabilities 25.2 601 Provisions 23 507 1 100 Taxation 80 70 Amounts due to bankers and short-term loans 26 3 187 5 174 Liabilities directly associated with assets classified as held for sale 20 2 222 126 Total equity and liabilities 47 191 49 259
30 31 Consolidated statement of changes in equity FOR THE YEAR ENDED 30 SEPTEMBER
Foreign Net actuarial Attributable currency Cash flow Revaluation Equity losses on to Barloworld Share capital translation hedging and legal compensation Total other Retained post-retirement Total retained Limited Non-controlling Interest of all and premium reserves reserves reserves reserves reserves income benefits income shareholders interest shareholders Notes Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Balance at 1 October 2017 441 4 844 14 123 163 5 144 17 535 (2 845) 14 690 20 275 602 20 877 Other comprehensive income (857) (17) (874) 345 345 (529) (529) Profit for the year 3 846 3 846 3 846 74 3 920 Total comprehensive income for the year (857) (17) (874) 3 846 345 4 191 3 317 74 3 391 Other reserve movements 4 45 (90) (41) 55 55 14 (3) 11 Other changes in minority shareholders interest and minority loans (183) (183) (183) (75) (258) Disposal of subsidiary (9) (22) (4) (35) (283) (283) (318) (318) Dividends 27 (872) (872) (872) (81) (953) Balance at 30 September 2018 441 3 987 (8) 146 69 4 194 20 098 (2 500) 17 598 22 233 517 22 750 Other comprehensive income 527 26 553 (488) (488) 65 65 Profit for the year 2 428 2 428 2 428 49 2 477 Total comprehensive income for the year 527 26 553 2 428 (488) 1 940 2 493 49 2 542 Cumulative adjustments for adoption of new standards 20 20 20 20 Other reserve movements (11) (213) (224) 129 129 (95) 23 (72) Other changes in minority shareholders interest and minority loans 173 173 Deconsolidation of subsidiary 27 (4) (4) (4) (457) (461) Dividends 21 (1 024) (1 024) (1 024) (33) (1 057) Balance at 30 September 2019 441 4 514 7 146 (144) 4 523 21 647 (2 988) 18 659 23 623 272 23 895 Foreign Net actuarial Attributable currency Cash flow Revaluation Equity losses on to Barloworld Share capital translation hedging and legal compensation Total other Retained post-retirement Total retained Limited Non-controlling Interest of all and premium reserves reserves reserves reserves reserves income benefits income shareholders interest shareholders Notes Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Balance at 1 October 2017 441 4 844 14 123 163 5 144 17 535 (2 845) 14 690 20 275 602 20 877 Other comprehensive income (857) (17) (874) 345 345 (529) (529) Profit for the year 3 846 3 846 3 846 74 3 920 Total comprehensive income for the year (857) (17) (874) 3 846 345 4 191 3 317 74 3 391 Other reserve movements 4 45 (90) (41) 55 55 14 (3) 11 Other changes in minority shareholders interest and minority loans (183) (183) (183) (75) (258) Disposal of subsidiary (9) (22) (4) (35) (283) (283) (318) (318) Dividends 27 (872) (872) (872) (81) (953) Balance at 30 September 2018 441 3 987 (8) 146 69 4 194 20 098 (2 500) 17 598 22 233 517 22 750 Other comprehensive income 527 26 553 (488) (488) 65 65 Profit for the year 2 428 2 428 2 428 49 2 477 Total comprehensive income for the year 527 26 553 2 428 (488) 1 940 2 493 49 2 542 Cumulative adjustments for adoption of new standards 20 20 20 20 Other reserve movements (11) (213) (224) 129 129 (95) 23 (72) Other changes in minority shareholders interest and minority loans 173 173 Deconsolidation of subsidiary 27 (4) (4) (4) (457) (461) Dividends 21 (1 024) (1 024) (1 024) (33) (1 057) Balance at 30 September 2019 441 4 514 7 146 (144) 4 523 21 647 (2 988) 18 659 23 623 272 23 895
32 33 Consolidated statement of cash flows FOR THE YEAR ENDED 30 SEPTEMBER
2019 2018 Notes Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers 60 450 65 334 Cash paid to employees and suppliers (53 211) (59 288) Cash generated from operations before investment in leasing and rental fleet A 7 239 6 046 Fleet leasing and equipment rental fleet (1 118) (1 593) Additions (2 940) (3 305) Proceeds on disposal 1 822 1 713 Vehicles rental fleet (809) (631) Additions (3 546) (3 921) Proceeds on disposal 2 737 3 290 Cash generated from operations 5 312 3 822 Finance costs (1 134) (1 184) Realised fair value adjustments on financial instruments (130) (140) Dividends received from investments, associates and joint ventures 72 113 Interest received 204 148 Taxation paid B (774) (1 058) Cash inflow from operations 3 550 1 700 Dividends paid (including non-controlling interest) (1 057) (953) Cash retained from operating activities 2 493 747 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiaries, investments and intangibles C (54) (86) Proceeds on disposal of subsidiaries D (84) 2 342 Proceeds on disposal of investments and intangible assets 5 Inflow/(outflow) of investment in leasing receivables 161 (53) Acquisition of other property, plant and equipment (633) (618) Replacement capital expenditure (154) (244) Expansion capital expenditure (479) (374) Proceeds on disposal of property, plant and equipment 119 306 Net cash (used in)/generated from investing activities (486) 1 891 Net cash inflow before financing activities 2 007 2 638 2019 2018 Notes Rm Rm CASH FLOWS FROM FINANCING ACTIVITIES Shares repurchased for equity-settled share-based payments (122) (43) Purchase of non-controlling interest (257) Non-controlling interest loan contribution 9 Proceeds from Khula Sizwe black public equity funding 164 Proceeds from long-term borrowings 69 2 956 Repayment of long-term borrowings (1 449) (3 322) Movement in short-term interest-bearing liabilities (1 529) 1 746 Net cash (used in)/generated from financing activities (2 858) 1 080 Net (decrease)/increase in cash and cash equivalents (851) 3 718 Cash and cash equivalents at beginning of year 7 893 3 925 Cash and cash equivalents held for sale at the beginning of year 19 102 Effect of foreign exchange rate movement on cash balance 71 167 Effect of foreign exchange rate movement on USD denominated cash 171 Effect of cash balances classified as held for sale (77) (19) Cash and cash equivalents at end of year 7 226 7 893 Cash balances not available for use due to reserving restrictions (note 19) 188 178
34 35 Notes to the consolidated cash flow statement FOR THE YEAR ENDED 30 SEPTEMBER
Restated 2019 2018 Rm Rm
A. CASH GENERATED FROM OPERATIONS IS CALCULATED AS FOLLOWS: Profit before taxation – continuing operations 2 498 2 387 Profit before taxation – discontinued operation 566 744 Adjustments for: Depreciation 2 387 2 505 Amortisation of intangible assets 115 147 Loss on disposal of plant and equipment and intangibles 62 64 Profit on disposal of properties and other assets 65 Dividends received (18) (39) Interest received (204) (147) Finance costs 1 134 1 184 Fair value adjustments on financial instruments (36) 137 Net impairment of assets and investments (134) 249 IFRS 2 charge 80 75 Non-cash movement in provisions and valuation allowances (45) 735 Other non-cash flow items 4 70 Operating cash flows before movements in working capital 6 474 8 111 Movement in working capital 765 (2 065) Movement in inventories 686 (1 466) Movement in receivables 244 (1 423) Movement in payables (165) 824 Cash generated from operations before investment in leasing and rental fleets 7 239 6 046 TAXATION PAID IS RECONCILED TO THE AMOUNTS DISCLOSED IN THE INCOME B. STATEMENT AS FOLLOWS: Amounts underpaid/(overpaid) at beginning of year 35 (29) Per the income statement (excluding deferred taxation) – group (825) (988) Adjustments in respect of subsidiaries acquired and sold including translation adjustments 12 (6) Net amounts overpaid/(underpaid) at end of year 4 (35) Cash amounts paid (774) (1 058)
C. ACQUISITION OF SUBSIDIARIES, INVESTMENTS AND INTANGIBLES: Property, plant and equipment, non-current assets, goodwill and non-controlling interest (3) Total net assets acquired (3) Goodwill arising on acquisitions (2) Net cash cost of subsidiaries acquired (5) Investment and intangible assets acquired (49) (86) Cash amounts paid to acquire subsidiaries, investments and intangibles (54) (86) 2019 2018 Rm Rm
D. PROCEEDS ON DISPOSAL OF SUBSIDIARIES, INVESTMENTS AND INTANGIBLES: Inventories disposed 879 969 Receivables disposed 341 1 196 Payables, taxation and deferred taxation balances disposed and settled (1 253) (785) Borrowings net of cash 95 162 Property, plant and equipment, non-current assets, goodwill and intangibles 406 1 048 Net assets disposed 468 2 590 Minority interest (457) Outstanding receivable from buyer (170) Less: Non-cash translation reserves realised on disposal of foreign subsidiaries (1 502) Profit on disposal 5 1 586 Net cash proceeds on disposal of subsidiaries 16 2 504 Bank balances and cash in subsidiaries disposed (100) (162) Cash proceeds on disposal of subsidiaries (84) 2 342 Effective 1 September 2019 Barloworld diluted its interest in NMI Durban South Motors (Pty) Ltd to 50%, resulting in the sale of the group’s 1.18% controlling interest for R16 million. Going forward NMI Durban South Motors (Pty) Ltd will be equity accounted as an associate. The net cash proceeds on disposal of subsidiaries arising in the prior year was from the sale of Equipment Iberia for R2.5 billion (€163 million) during June 2018.
36 37 Notes to the consolidated annual financial statements FOR THE YEAR ENDED 30 SEPTEMBER
Discontinued Continuing operations Continuing operations operation Consolidated Eliminations Equipment and Handling Automotive and Logistics Corporate Equipment Car rental Europe and Equipment Handling Motor retail Southern Africa Avis Fleet Logistics Avis fleet Avis Fleet R million 2019 2018* 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018* 2019 2018 2019 2018 2019 2018 1 OPERATING AND GEOGRAPHICAL SEGMENTS** Revenue Southern Africa 50 544 52 180 20 434 19 775 28 114 18 736 19 955 6 271 6 528 5 074 5 807 1 1 3 372 3 326 Europe@ 105 117 105 117 3 337 Russia 6 185 7 797 6 185 7 797 56 834 60 094 26 619 27 572 28 114 18 736 19 955 6 271 6 528 5 179 5 924 1 1 3 372 6 663 Inter-segment revenue *** (3 078) (850) 2 276 11 64 6 5 376 370 409 412 56 834 60 094 (3 078) (850) 28 895 27 572 28 114 18 747 20 019 6 277 6 533 5 555 6 294 410 413 3 372 6 663 Segment result Operating profit/(loss) Southern Africa 2 775 3 011 1 836 1 790 4 (20) 561 524 523 536 31 255 (180) (74) 625 641 Europe@ (149) (52) 7 7 (156) (59) 136 Russia 719 804 719 804 – Operating profit/(loss) 3 345 3 762 2 555 2 594 4 (20) 561 524 523 536 38 262 (336) (133) 625 778 B-BBEE transaction charge (73) (73) Fair value adjustments on financial instruments 32 (122) (108) (88) 1 4 (2) (2) 1 (6) 140 (30) (9) (11) Total segment result 3 304 3 640 2 447 2 506 5 (16) 559 522 523 536 39 256 (269) (163) 616 767 By geographical region Southern Africa 2 601 2 915 1 735 1 699 5 (16) 559 522 523 536 32 249 (253) (74) 616 630 Europe@ (9) (82) 7 7 (16) (90) 136 Russia 712 807 712 807 Total segment result 3 304 3 640 2 447 2 506 5 (16) 559 522 523 536 39 256 (269) (163) 616 767 Income/(loss) from associates and joint ventures 231 235 250 247 (24) (6) 4 (4) – – (3) 1 (67) Segment result including associate income 3 535 3 875 2 697 2 753 (19) (22) 563 518 523 536 39 254 (268) (163) 616 700 Finance costs (1 085) (1 145) (49) (39) Income from investments 192 140 11 7 Non-operating and capital items 87 (248) (12) 9 2 729 2 622 566 677 Taxation (771) (870) (79) (109) Net profit 1 958 1 752 33 1 600 Profit from discontinued operation 519 2 168 519 2 168 Profit for the year 2 477 3 920
* The consolidated total excludes discontinued operations for income statement items and the 2018 income statement has been restated accordingly. In accordance with IFRS 5 the statement of financial position for 2018 has not been restated. Discontinued Continuing operations Continuing operations operation Consolidated Eliminations Equipment and Handling Automotive and Logistics Corporate Equipment Car rental Europe and Equipment Handling Motor retail Southern Africa Avis Fleet Logistics Avis fleet Avis Fleet R million 2019 2018* 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018* 2019 2018 2019 2018 2019 2018 1 OPERATING AND GEOGRAPHICAL SEGMENTS** Revenue Southern Africa 50 544 52 180 20 434 19 775 28 114 18 736 19 955 6 271 6 528 5 074 5 807 1 1 3 372 3 326 Europe@ 105 117 105 117 3 337 Russia 6 185 7 797 6 185 7 797 56 834 60 094 26 619 27 572 28 114 18 736 19 955 6 271 6 528 5 179 5 924 1 1 3 372 6 663 Inter-segment revenue *** (3 078) (850) 2 276 11 64 6 5 376 370 409 412 56 834 60 094 (3 078) (850) 28 895 27 572 28 114 18 747 20 019 6 277 6 533 5 555 6 294 410 413 3 372 6 663 Segment result Operating profit/(loss) Southern Africa 2 775 3 011 1 836 1 790 4 (20) 561 524 523 536 31 255 (180) (74) 625 641 Europe@ (149) (52) 7 7 (156) (59) 136 Russia 719 804 719 804 – Operating profit/(loss) 3 345 3 762 2 555 2 594 4 (20) 561 524 523 536 38 262 (336) (133) 625 778 B-BBEE transaction charge (73) (73) Fair value adjustments on financial instruments 32 (122) (108) (88) 1 4 (2) (2) 1 (6) 140 (30) (9) (11) Total segment result 3 304 3 640 2 447 2 506 5 (16) 559 522 523 536 39 256 (269) (163) 616 767 By geographical region Southern Africa 2 601 2 915 1 735 1 699 5 (16) 559 522 523 536 32 249 (253) (74) 616 630 Europe@ (9) (82) 7 7 (16) (90) 136 Russia 712 807 712 807 Total segment result 3 304 3 640 2 447 2 506 5 (16) 559 522 523 536 39 256 (269) (163) 616 767 Income/(loss) from associates and joint ventures 231 235 250 247 (24) (6) 4 (4) – – (3) 1 (67) Segment result including associate income 3 535 3 875 2 697 2 753 (19) (22) 563 518 523 536 39 254 (268) (163) 616 700 Finance costs (1 085) (1 145) (49) (39) Income from investments 192 140 11 7 Non-operating and capital items 87 (248) (12) 9 2 729 2 622 566 677 Taxation (771) (870) (79) (109) Net profit 1 958 1 752 33 1 600 Profit from discontinued operation 519 2 168 519 2 168 Profit for the year 2 477 3 920
38 39 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
1 OPERATING AND GEOGRAPHICAL SEGMENTS** continued Discontinued Continuing operations Continuing operations operation Consolidated Eliminations Equipment and Handling Automotive and Logistics Corporate Equipment Car rental Europe and Equipment Handling Motor retail Southern Africa Avis Fleet Logistics Avis fleet Avis Fleet R million 2019 2018* 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018* 2019 2018 2019 2018 2019 2018 Additional segment information Analysis of revenue by type – Sale of goods 40 666 20 779 28 16 604 3 255 938 – Rendering of services 16 168 5 840 2 132 3 016 5 179 1 2 434 Total external revenue 56 834 26 619 28 18 736 6 271 5 179 1 3 372 Non cash expenses per segment Depreciation 1 561 1 633 683 648 57 65 694 752 109 155 18 13 826 871 Amortisation of intangibles 115 140 39 37 22 22 2 4 48 73 4 4 8 Impairment (profit)/loss (87) 249 1 16 1 (209) 26 6 95 220 5 2 12 9 Assets Property, plant and equipment 7 879 12 656 4 392 4 600 1 241 1 966 389 459 4 079 871 908 986 645 Intangible assets 1 527 1 528 1 283 1 186 111 183 11 13 16 99 116 23 16 Investment in associates and joint ventures 2 252 1 342 1 299 974 266 290 654 40 34 39 Long-term finance lease receivables 2 211 2 28 183 Long-term financial assets 710 909 464 774 65 63 77 66 104 5 Vehicle rental fleet 3 137 3 058 3 137 3 058 Inventories 8 072 9 592 5 967 6 774 13 1 700 2 250 400 486 63 36 36 (31) (30) Trade and other receivables 7 384 8 883 5 382 5 737 22 57 579 736 629 633 592 1 000 1 335 (228) (207) Contact assets 981 900 81 Assets classified as held for sale 5 780 497 70 (42) 5 493 166 403 93 93 Segment assets 37 725 38 678 19 759 20 072 288 361 4 308 5 238 4 566 4 648 5 493 4 933 2 330 2 864 981 562 By geographical region Southern Africa 33 110 34 159 15 353 15 756 312 377 4 308 5 238 4 566 4 648 5 493 4 933 2 280 2 748 798 459 Europe@ 209 203 (24) (16) 51 115 183 103 Russia 4 406 4 316 4 406 4 316 Total segment assets 37 725 38 678 19 759 20 072 288 361 4 308 5 238 4 566 4 648 5 493 4 933 2 330 2 864 981 562 Goodwill 1 408 1 873 270 252 215 406 793 793 292 130 130 Taxation 71 105 Deferred taxation assets 761 710 Cash and cash equivalents 7 226 7 893 Consolidated total assets 47 191 49 259 Liabilities Long-term non-interest-bearing including provisions 2 359 2 290 27 20 3 84 92 22 26 355 66 29 2 160 1 767 Trade and other payables including provisions 9 870 12 222 4 626 5 456 24 52 2 361 3 022 2 108 1 768 800 799 1 170 (48) (46) Contract liabilities 601 601
* The consolidated total excludes discontinued operations for income statement items and the 2018 income statement has been restated accordingly. In accordance with IFRS 5 the statement of financial position for 2018 has not been restated. Discontinued Continuing operations Continuing operations operation Consolidated Eliminations Equipment and Handling Automotive and Logistics Corporate Equipment Car rental Europe and Equipment Handling Motor retail Southern Africa Avis Fleet Logistics Avis fleet Avis Fleet R million 2019 2018* 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018* 2019 2018 2019 2018 2019 2018 Additional segment information Analysis of revenue by type – Sale of goods 40 666 20 779 28 16 604 3 255 938 – Rendering of services 16 168 5 840 2 132 3 016 5 179 1 2 434 Total external revenue 56 834 26 619 28 18 736 6 271 5 179 1 3 372 Non cash expenses per segment Depreciation 1 561 1 633 683 648 57 65 694 752 109 155 18 13 826 871 Amortisation of intangibles 115 140 39 37 22 22 2 4 48 73 4 4 8 Impairment (profit)/loss (87) 249 1 16 1 (209) 26 6 95 220 5 2 12 9 Assets Property, plant and equipment 7 879 12 656 4 392 4 600 1 241 1 966 389 459 4 079 871 908 986 645 Intangible assets 1 527 1 528 1 283 1 186 111 183 11 13 16 99 116 23 16 Investment in associates and joint ventures 2 252 1 342 1 299 974 266 290 654 40 34 39 Long-term finance lease receivables 2 211 2 28 183 Long-term financial assets 710 909 464 774 65 63 77 66 104 5 Vehicle rental fleet 3 137 3 058 3 137 3 058 Inventories 8 072 9 592 5 967 6 774 13 1 700 2 250 400 486 63 36 36 (31) (30) Trade and other receivables 7 384 8 883 5 382 5 737 22 57 579 736 629 633 592 1 000 1 335 (228) (207) Contact assets 981 900 81 Assets classified as held for sale 5 780 497 70 (42) 5 493 166 403 93 93 Segment assets 37 725 38 678 19 759 20 072 288 361 4 308 5 238 4 566 4 648 5 493 4 933 2 330 2 864 981 562 By geographical region Southern Africa 33 110 34 159 15 353 15 756 312 377 4 308 5 238 4 566 4 648 5 493 4 933 2 280 2 748 798 459 Europe@ 209 203 (24) (16) 51 115 183 103 Russia 4 406 4 316 4 406 4 316 Total segment assets 37 725 38 678 19 759 20 072 288 361 4 308 5 238 4 566 4 648 5 493 4 933 2 330 2 864 981 562 Goodwill 1 408 1 873 270 252 215 406 793 793 292 130 130 Taxation 71 105 Deferred taxation assets 761 710 Cash and cash equivalents 7 226 7 893 Consolidated total assets 47 191 49 259 Liabilities Long-term non-interest-bearing including provisions 2 359 2 290 27 20 3 84 92 22 26 355 66 29 2 160 1 767 Trade and other payables including provisions 9 870 12 222 4 626 5 456 24 52 2 361 3 022 2 108 1 768 800 799 1 170 (48) (46) Contract liabilities 601 601
40 41 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
1 OPERATING AND GEOGRAPHICAL SEGMENTS** continued
Discontinued Continuing operations Continuing operations operation Consolidated Eliminations Equipment and Handling Automotive and Logistics Corporate Equipment Car rental Europe and Equipment Handling Motor retail Southern Africa Avis Fleet Logistics Avis fleet Avis Fleet R million 2019 2018* 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018* 2019 2018 2019 2018 2019 2018 Liabilities directly associated with assets classified as held for sale 2 222 126 4 938 78 126 (2 794) Segment liabilities 15 052 14 638 5 254 5 476 24 55 2 445 3 113 2 130 1 794 4 938 1 155 943 1 325 (682) 1 721 By geographical region Southern Africa 11 504 11 417 4 018 4 119 8 55 2 445 3 113 2 130 1 794 4 938 1 155 919 1 303 (2 954) (121) Europe@ 2 312 1 864 16 24 22 2 272 1 842 Russia 1 236 1 357 1 236 1 357 Segment liabilities 15 052 14 638 5 254 5 476 24 55 2 445 3 113 2 130 1 794 4 938 1 155 943 1 325 (682) 1 721 Interest-bearing liabilities (excluding held for sale amounts) 7 808 11 169 Deferred taxation liabilities 356 632 Taxation 80 70 Consolidated total liabilities 23 296 26 509 Capital additions Southern Africa 6 954 7 587 1 324 1 580 88 113 3 572 4 074 1 721 1 694 102 97 147 28 Europe@ 91 91 Russia 165 166 165 166 7 119 7 844 1 489 1 837 88 113 3 572 4 074 1 721 1 694 102 97 147 28
* The consolidated total excludes discontinued operations for income statement items and the 2018 income statement has been restated accordingly. In accordance with IFRS 5 the statement of financial position for 2018 has not been restated. ** The geographical segments are determined by the location of assets. *** Inter segment revenue is priced on an arm's-length basis. @ Including Middle East and Iberia.
Revenue generated in South Africa for the year was R41 287 million (2018: R47 805 million). Non-current assets based in South Africa was R9 382 million (2018: R13 088 million). Discontinued Continuing operations Continuing operations operation Consolidated Eliminations Equipment and Handling Automotive and Logistics Corporate Equipment Car rental Europe and Equipment Handling Motor retail Southern Africa Avis Fleet Logistics Avis fleet Avis Fleet R million 2019 2018* 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018* 2019 2018 2019 2018 2019 2018 Liabilities directly associated with assets classified as held for sale 2 222 126 4 938 78 126 (2 794) Segment liabilities 15 052 14 638 5 254 5 476 24 55 2 445 3 113 2 130 1 794 4 938 1 155 943 1 325 (682) 1 721 By geographical region Southern Africa 11 504 11 417 4 018 4 119 8 55 2 445 3 113 2 130 1 794 4 938 1 155 919 1 303 (2 954) (121) Europe@ 2 312 1 864 16 24 22 2 272 1 842 Russia 1 236 1 357 1 236 1 357 Segment liabilities 15 052 14 638 5 254 5 476 24 55 2 445 3 113 2 130 1 794 4 938 1 155 943 1 325 (682) 1 721 Interest-bearing liabilities (excluding held for sale amounts) 7 808 11 169 Deferred taxation liabilities 356 632 Taxation 80 70 Consolidated total liabilities 23 296 26 509 Capital additions Southern Africa 6 954 7 587 1 324 1 580 88 113 3 572 4 074 1 721 1 694 102 97 147 28 Europe@ 91 91 Russia 165 166 165 166 7 119 7 844 1 489 1 837 88 113 3 572 4 074 1 721 1 694 102 97 147 28
* The consolidated total excludes discontinued operations for income statement items and the 2018 income statement has been restated accordingly. In accordance with IFRS 5 the statement of financial position for 2018 has not been restated. ** The geographical segments are determined by the location of assets. *** Inter segment revenue is priced on an arm's-length basis. @ Including Middle East and Iberia.
Revenue generated in South Africa for the year was R41 287 million (2018: R47 805 million). Non-current assets based in South Africa was R9 382 million (2018: R13 088 million).
42 43 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
2019 Rm 2 REVENUE Sale of goods (earned at a point in time) 40 666 Equipment (new and used) 11 565 Vehicles (new and used) 17 951 Parts (new and used) 11 150 Rendering of services (earned over time) 16 168 Parts 721 Service 5 344 – Workshop and in-field service 3 944 – Aftersales 263 – Fitment and repairs 1 137 Rental 3 988 Commissions 875 Freight forwarding 265 Supply chain support solutions 2 229 Transportation 2 746 Total continuing operations 56 834 Discontinued operations Avis Fleet 3 372 Total discontinued operations (note 20) 3 372 Total group 60 206
Revenue as disclosed for September 2018 restated for the Avis Fleet and Iberia discontinued operations: Restated 2018 Rm Sale of goods 44 844 Rendering of services 9 208 Rentals received 5 261 Other 781 Total continuing operations 60 094 Discontinued operations Equipment Iberia 3 337 Avis Fleet 3 326 Total discontinued operations (note 20) 6 663 Total group 66 757 Restated 2019 2018 Rm Rm 3 OPERATING PROFIT Operating profit is arrived at as follows: Revenue 56 834 60 094 Less: Net expenses 53 562 56 332 Cost of sales 43 928 47 013 Other operating costs 9 634 9 319 Total continuing operations 3 272 3 762 Discontinued operations – Equipment Iberia 136 – Avis Fleet 625 642 Total discontinued operations (note 20) 625 778 Total group 3 897 4 540 Expenses include the following: Amortisation of intangible assets arising from acquisitions 15 29 Operating lease charges 1 156 928 Operating lease charges – continuing operations 1 143 868 Land and buildings 483 482 Plant, vehicles and equipment 660 386 Operating lease charges – discontinued operation 13 60 Land and buildings 7 24 Plant, vehicles and equipment 6 36 Auditors’ remuneration: 69 60 Audit fees 67 56 Audit fees – continuing operations 63 48 Audit fees – discontinued operation 4 8 Fees for other services 2 4 Fees – continuing operations 2 4 Staff costs (excluding directors' emoluments) 9 418 9 725 Continuing operations 9 137 8 746 Discontinued operation 281 979 Loss on disposal of plant and equipment (including rental assets) and intangibles: 68 74 Continuing operations 69 77 Discontinued operation (1) (3) Amounts recognised in respect of retirement benefit plans (note 24): Defined contribution funds 972 861 Continuing operations 932 820 Discontinued operation 40 41 Defined benefit funds 99 14 Continuing operations^ 99 14 Inventory movements (134) (225) Amount of write-down of inventory to net realisable value and losses of inventory* (193) (261) Amount of reversals of inventory previously written down* 60 36
* Refer to note 17 for further details ^ Includes R88 million for the equalisation of the guaranteed minimum pensions cost. (Note 24) 44 45 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
Restated 2019 2018 Rm Rm 4 FAIR VALUE ADJUSTMENTS ON FINANCIAL INSTRUMENTS Included in operating profit as valuation of insurance companies 13 (6) Disclosed as fair value adjustments on financial instruments for continuing operations 32 (122) Total continuing operations 45 (128) Discontinued operations (note 20) (9) (11) Total group 36 (139) Per IFRS 9 category Profits on revaluation of financial assets or liabilities at fair value* 153 Losses on revaluation of financial assets or liabilities at fair value (153) Financial assets/liabilities at fair value through profit or loss 36 Total group 36
* Includes gains on foreign currency deposits of USD197 million (R2 980 million).
Restated 2019 2018 Rm Rm 5 FINANCE COSTS Interest on financial liabilities at amortised cost: Corporate bonds and other long-term borrowings (615) (569) Bank and other short-term borrowings (303) (375) Floor plan (75) (73) Defined benefit plan (49) (57) Capitalised finance leases (43) (71) Total continuing operations (1 085) (1 145) Discontinued operations (note 20) * (49) (39) Total group (1 134) (1 184)
* The finance charges of the Avis Fleet discontinued operation excludes R277 million (2018: R268 million) of intergroup interest which has been consolidated in the group’s continuing operations.
Restated 2019 2018 Rm Rm 6 INCOME FROM INVESTMENTS Dividends – listed and unlisted investments 18 39 Interest on financial assets at amortised cost 192 140 Total continuing operations 210 179 Discontinued operations (note 20) 11 7 Total group 221 186 Included in operating profit as dividends received from insurance companies 18 39 Disclosed in income statement as income from investments 192 140 Total continuing operations 210 179 Discontinued operations (note 20) 11 7 Total group 221 186 Restated 2019 2018 Rm Rm 7 NON-OPERATING AND CAPITAL ITEMS Fair value gain on deconsolidation of subsidiary (note 13) 212 Impairment of investments (25) (24) Impairment of goodwill** (70) Profit on disposal of subsidiary 12 Profit on disposal of property, plant, equipment, intangibles and other assets 3 1 Impairment of property, plant and equipment, intangibles and other assets** (115) (155) Gross non-operating and capital items from continuing operations 87 (248) Taxation (charge)/benefit on non-operating and capital items (3) 20 Net non-operating and capital items from continuing operations 84 (228) Non-operating and capital items from discontinued operations (12) 9 Taxation benefit/(charge) on non-operating and capital items from discontinued operations 1 (2) Non-operating and capital items included in associate income from discontinued operations (47) Net non-operating and capital items profit/(loss) 73 (268)
** Refer notes 10, 11 and 12 for an explanation of the assumptions and circumstances underlying the impairments.
Restated 2019 2018 Rm Rm 8 TAXATION South African normal taxation Current year (738) (826) Prior year (7) (40) (745) (866) Foreign and withholding taxation Current year (24) (38) (24) (38) Deferred taxation Current year (16) 36 Prior year 14 (4) Attributable to a change in the rate of income tax – 2 (2) 34 Taxation attributable to the company and its subsidiaries (771) (870) Discontinued operation (note 20) – Automotive Fleet – Normal taxation (56) (58) – Equipment Iberia – Normal taxation (26) – Automotive Fleet – Deferred taxation (23) (22) – Equipment Iberia – Deferred taxation (3) Total group (850) (979)
46 47 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
8 TAXATION continued
2019 2018 Continuing operations % % South Africa normal taxation rate – continuing operations 28.0 28.0 Foreign rate differential 4.9 2.7 Reduction in rate of taxation (8.9) (9.7) Exempt income and special allowances@ (4.9) (8.9) Taxation losses of prior periods (0.8) Non-operating and capital items taxation (1.6) IAS12.41 adjustment** (2.1) Prior year taxation (0.3) Increase in rate of taxation 6.9 10.8 Disallowable charges*** 6.2 2.7 Non-operating and capital items taxation 1.6 Prior year taxation 1.6 IAS12.41 adjustment** 3.6 Current year losses not utilised 0.7 1.3 Taxation as a percentage of profit before taxation 30.9 31.8 Taxation continuing operations (excluding prior year taxation and non-operating and capital items taxation) as a percentage of profit before taxation (excluding non-operating and capital items) 32.1 32.1 Taxation – excluding Avis Fleet interest (excluding prior year taxation and non–operating and capital items taxation) as a percentage of profit before taxation (excluding non– operating and capital items) 28.8 29.1
@ Exempt income and special allowances largely comprise learnerships, gains on rental assets, dividends, exempt investment income and other capital income/gains. ** The group has companies in Russia, Mozambique and Angola where deferred taxes are recognized for temporary differences that arise when an entity’s taxable profit or loss (and thus the tax basis of it's non-monetary assets and liabilities) are measured in a currency different than its functional currency. Changes in the exchange rate result in a deferred tax asset or liability which is charged to profit or loss. *** Disallowable charges relate largely to capital expenses and other such expenses not incurred in the production of income including professional fees, donations, entertainment, depreciation, amortisation, non-deductible allowances on leasehold improvements and goodwill and other asset impairments. 2019 2018 Rm Rm Group tax losses at the end of the year: South African – taxation losses (582) (453) Foreign – taxation losses (1 153) (1 188) (1 735) (1 641) Utilised to reduce deferred taxation liabilities or create deferred taxation assets 1 321 1 328 Losses on which no deferred taxation assets raised due to uncertainty regarding utilisation (414) (313) 8 TAXATION continued 2019 2018 Rm Rm The losses for which no deferred taxation asset has been raised are as follows: South African tax losses Automotive (27) (25) Barloworld Logistics Africa (147) (62) Barloworld Transport Solutions (4) Foreign tax losses Equipment Russia (163) (149) Agriculture Mozambique (18) Avis Fleet* (73) (59) (414) (313)
The taxation losses in Barloworld Handling US group expire in the 2026 financial year.
* Includes foreign losses classified as held for sale (note 20)
In relation to all the other losses listed above, there is no expiry date, or limit of carry forward, provided that the businesses continue trading. Restated 2019 2018 Rm Rm 9 EARNINGS AND HEADLINE EARNINGS PER SHARE 9.1 DILUTED WEIGHTED AVERAGE NUMBER OF SHARES Weighted average number of ordinary shares (net of share buy-back) 211 084 956 210 874 540 Increase in number of shares as a result of unexercised share options and unvested forfeitable shares 612 645 1 272 832 Fully converted weighted average number of shares 211 697 601 212 147 372 Account is taken of the number of ordinary shares in issue for the period in which they are entitled to participate in the net profit of the group. Net profit for the year attributable to shareholders of Barloworld Limited 2 428 3 846 Net profit for the year from continuing operations 1 915 1 691 Net profit for the year from discontinued operations 513 2 155
2019 2018 2019 2018 Cents Cents 9.2 EARNINGS PER SHARE BASIC The weighted average number of ordinary shares 211 084 956 210 874 540 Earnings per share (basic) 1150.2 1823.8 Earnings per share from continuing operations (basic) 907.2 801.9 Earnings per share from discontinued operations (basic) 243.0 1021.9 DILUTED Fully converted weighted average number of shares (note 9.1) 211 697 601 212 147 372 Earnings per share (diluted) 1146.9 1812.9 Earnings per share from continuing operations (diluted) 904.6 797.1 Earnings per share from discontinued operations (diluted) 242.3 1015.8 Percentage dilution 0.3 0.6
48 49 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
9 EARNINGS AND HEADLINE EARNINGS PER SHARE continued
2019 2018 Rm Rm 9.3 HEADLINE EARNINGS PER SHARE BASIC Profit for the year attributable to Barloworld Limited shareholders 2 428 3 846 Adjusted for the following: Gross remeasurements excluded from headline earnings (108) (1 361) Profit on disposal of subsidiaries and investments (45) (98) Profit on disposal of plant, property, equipment and intangible excluding rental assets (3) (10) Impairment of goodwill 70 Impairment of plant and equipment and intangibles and other assets 127 155 Fair value gain on deconsolidation of subsidiary (212) Impairment of investments in subsidiaries, associates and joint ventures 25 24 Realisation of translation reserve on disposal of foreign subsidiaries (1 502) Taxation effects of remeasurements 2 (18) Taxation benefit on impairment and disposal of property, plant and equipment and intangibles (20) Taxation charge on profit on disposal of subsidiaries 2 Taxation charge on impairment of goodwill 2 Associate and non-controlling interest in remeasurements 47 Net remeasurements excluded from headline earnings (106) (1 332) Headline earnings 2 322 2 514 Profit from continuing operations 1 958 1 752 Non-controlling shareholder's interest in net profit from continuing operations (43) (61) Profit from continuing operations attributable to Barloworld Limited shareholders 1 915 1 691 Adjusted for the following items in: Gross remeasurements excluded from headline earnings from continuing operations (87) 248 Profit on disposal of subsidiaries (12) Profit on disposal of plant, property, equipment and intangible excluding rental assets (3) (1) Impairment of goodwill 70 Impairment of plant and equipment and intangibles and other assets 115 155 Fair value gain on deconsolidation of subsidiary (212) Impairment of investments in subsidiaries, associates and joint ventures 25 24 Taxation effects of remeasurements 3 (20) Taxation benefit/(charge) on impairment and disposal of property, plant and equipment and intangibles 1 (22) Taxation benefit on impairment of goodwill 2 Taxation charge on profit on disposal of subsidiaries 2 Associate and non-controlling interest in remeasurements – Net remeasurements excluded from headline earnings from continuing operations (84) 228 Headline earnings from continuing operations 1 831 1 919 Profit from discontinued operation attributable to Barloworld Limited shareholders 519 2 168 Non-controlling shareholders interest in net profit from discontinued operations (6) (13) Profit from discontinued operation attributable to Barloworld Limited shareholders 513 2 155 9 EARNINGS AND HEADLINE EARNINGS PER SHARE continued
2019 2018 Rm Rm Adjusted for the following items in discontinued operations: Gross remeasurements excluded from headline earnings from discontinued operations (21) (1 609) Profit on disposal of subsidiaries (note 20) (33) (98) Realisation of translation reserve on disposal of foreign subsidiaries (1 502) Profit on disposal of property and other assets (9) Impairment of plant and equipment and intangibles and other assets 12 Taxation effects of remeasurements (1) 2 Taxation (charge)/benefit of discontinued operations (1) 2 Associate and non-controlling interest in remeasurements 47 Net remeasurements excluded from headline earnings from discontinued operations (22) (1 560) Headline earnings from discontinued operations 491 595
2019 2018 2019 2018 Cents Cents Headline earnings per share BASIC The weighted average number of ordinary shares 211 084 956 210 874 540 Headline earnings per share (basic) 1100.0 1192.1 Headline earnings per share from continuing operations (basic) 867.4 910.0 Headline earnings per share from discontinued operations (basic) 232.6 282.1 DILUTED Fully converted weighted average number of shares (note 9.1) 211 697 601 212 147 372 Headline earnings per share (diluted) 1096.8 1185.0 Headline earnings per share from continuing operations (diluted) 864.9 904.5 Headline earnings per share from discontinued operations (diluted) 231.9 280.5 Percentage dilution 0.6 0.6
50 51 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
2019 2018 Freehold and Plant, Freehold and Plant, leasehold land equipment and Rental assets Rental assets leasehold land equipment Rental assets Rental assets and buildings furniture Vehicles equipment vehicles Total and buildings and furniture Vehicles equipment vehicles Total assets Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm 10 PROPERTY, PLANT AND EQUIPMENT COST At 1 October 5 906 2 472 1 796 3 479 9 199 22 852 6 704 3 053 2 128 3 491 9 191 24 567 Subsidiaries acquired – 2 – – – 2 – – – – – – Other additions 298 227 108 1 232 5 255 7 120 272 176 170 1 622 5 604 7 844 Deconsolidation/disposal of subsidiaries (580) (110) (63) – – (753) (1 103) (676) (44) (315) 25 (2 113) Other disposals and reclassification (41) (116) (222) (1 363) (5 014) (6 756) (29) (90) (476) (1 330) (5 641) (7 566) Translation differences 144 53 30 55 27 309 62 9 18 11 20 120 At 30 September 5 727 2 528 1 649 3 403 9 467 22 774 5 906 2 472 1 796 3 479 9 199 22 852 ACCUMULATED AMORTISATION AND IMPAIRMENT At 1 October 1 116 1 946 893 848 2 081 6 884 1 423 2 347 949 779 2 058 7 555 Depreciation 124 182 125 486 1 471 2 388 136 209 156 500 1 504 2 505 Subsidiaries acquired – – – – – – – – – – – – Subsidiaries disposed (61) (87) (16) – – (164) (435) (598) (43) (87) 25 (1 138) Deconsolidation/disposal of subsidiaries (19) (97) (141) (303) (1 446) (2 006) (21) (80) (210) (373) (1 517) (2 199) Impairment^^ 117 28 2 7 – 154 1 56 27 19 – 103 Translation differences 37 43 23 33 8 144 12 12 14 9 11 58 At 30 September 1 314 2 015 886 1 071 2 114 7 400 1 116 1 946 893 848 2 081 6 884 CARRYING AMOUNT At 30 September 4 413 513 763 2 332 7 353 15 374 4 790 526 903 2 631 7 118 15 968 Less: Vehicle rental fleet assets reflected under current assets – – – – 3 137 3 137 – – – – 3 058 3 058 Classified as held for sale (note 20) 172 15 1 – 4 170 4 358 110 34 109 – – 253 Balance reflected as property, plant and equipment 4 241 498 762 2 332 46 7 879 4 680 492 794 2 631 4 060 12 657 Net book value of capitalised leases included in above balance 149 63 352 564 121 36 323 480 Future minimum lease receivables under non-cancellable operating leases for Avis Fleet: Within one year 1 029 872 Two to five years 1 159 1 109 More than five years 4 8 2 192 1 989
^^ The impairments primarily relate to the underperformance of KLL and Smartmatta assets in the Logistics business classified as held for sale at 30 September 2019
The carrying amounts of assets encumbered for which title is restricted was R22 million for properties (mortgage bond) and R360 million for vehicles, totaling R382 million. Vehicle rental assets include long-term fleet in southern Africa leased to customers for periods in excess of 12 months with an average lease term of 44 months (2018: 45 months) and an average residual value of 46% (2018: 46%). Please refer to Note 28 for contractual commitments for the acquisition of property, plant and equipment. 2019 2018 Freehold and Plant, Freehold and Plant, leasehold land equipment and Rental assets Rental assets leasehold land equipment Rental assets Rental assets and buildings furniture Vehicles equipment vehicles Total and buildings and furniture Vehicles equipment vehicles Total assets Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm 10 PROPERTY, PLANT AND EQUIPMENT COST At 1 October 5 906 2 472 1 796 3 479 9 199 22 852 6 704 3 053 2 128 3 491 9 191 24 567 Subsidiaries acquired – 2 – – – 2 – – – – – – Other additions 298 227 108 1 232 5 255 7 120 272 176 170 1 622 5 604 7 844 Deconsolidation/disposal of subsidiaries (580) (110) (63) – – (753) (1 103) (676) (44) (315) 25 (2 113) Other disposals and reclassification (41) (116) (222) (1 363) (5 014) (6 756) (29) (90) (476) (1 330) (5 641) (7 566) Translation differences 144 53 30 55 27 309 62 9 18 11 20 120 At 30 September 5 727 2 528 1 649 3 403 9 467 22 774 5 906 2 472 1 796 3 479 9 199 22 852 ACCUMULATED AMORTISATION AND IMPAIRMENT At 1 October 1 116 1 946 893 848 2 081 6 884 1 423 2 347 949 779 2 058 7 555 Depreciation 124 182 125 486 1 471 2 388 136 209 156 500 1 504 2 505 Subsidiaries acquired – – – – – – – – – – – – Subsidiaries disposed (61) (87) (16) – – (164) (435) (598) (43) (87) 25 (1 138) Deconsolidation/disposal of subsidiaries (19) (97) (141) (303) (1 446) (2 006) (21) (80) (210) (373) (1 517) (2 199) Impairment^^ 117 28 2 7 – 154 1 56 27 19 – 103 Translation differences 37 43 23 33 8 144 12 12 14 9 11 58 At 30 September 1 314 2 015 886 1 071 2 114 7 400 1 116 1 946 893 848 2 081 6 884 CARRYING AMOUNT At 30 September 4 413 513 763 2 332 7 353 15 374 4 790 526 903 2 631 7 118 15 968 Less: Vehicle rental fleet assets reflected under current assets – – – – 3 137 3 137 – – – – 3 058 3 058 Classified as held for sale (note 20) 172 15 1 – 4 170 4 358 110 34 109 – – 253 Balance reflected as property, plant and equipment 4 241 498 762 2 332 46 7 879 4 680 492 794 2 631 4 060 12 657 Net book value of capitalised leases included in above balance 149 63 352 564 121 36 323 480 Future minimum lease receivables under non-cancellable operating leases for Avis Fleet: Within one year 1 029 872 Two to five years 1 159 1 109 More than five years 4 8 2 192 1 989
^^ The impairments primarily relate to the underperformance of KLL and Smartmatta assets in the Logistics business classified as held for sale at 30 September 2019
The carrying amounts of assets encumbered for which title is restricted was R22 million for properties (mortgage bond) and R360 million for vehicles, totaling R382 million. Vehicle rental assets include long-term fleet in southern Africa leased to customers for periods in excess of 12 months with an average lease term of 44 months (2018: 45 months) and an average residual value of 46% (2018: 46%). Please refer to Note 28 for contractual commitments for the acquisition of property, plant and equipment.
52 53 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
2019 2018 Rm Rm 11 GOODWILL COST At 1 October 2 140 2 129 Subsidiaries acquired* 2 – Deconsolidation of subsidiary# (203) – Translation differences 18 11 At 30 September 1 958 2 140 ACCUMULATED IMPAIRMENT LOSSES At 1 October 267 197 Deconsolidation of subsidiary# (9) – Impairment – 70 Translation differences – – At 30 September 258 267 CARRYING AMOUNT 1 700 1 873 Classified as held for sale (note 20) (292) Total per statement of financial position 1 408 1 873
* This arises from the acquisition by NMI of a panel beating business while NMI was still a subsidiary. The purchase price was R5 million and the fair value of the net asset was R2 million. This is considered immaterial and no further disclosure is provided. # Effective 1 September 2019 NMI Durban South Motors (Pty) Ltd was no longer consolidated as subsidiary and is now recognised as an associate due to loss of control as per IFRS 10.
Goodwill is allocated to the following CGUs for impairment testing purposes: Reportable Carrying Carrying Geographical segment to which amount of amount of Significant cash-generating units (CGUs) Location the CGU belong Goodwill Goodwill 2019 2018 Rm Rm Car rental Avis Rent a Car southern Africa South Africa southern Africa 791 791 Avis Fleet southern Africa* South Africa Leasing 292 281 Equipment Russia Russia Equipment 212 204 Equipment Botswana Zambia Angola Mozambique Malawi (BZAMM) Rest of Africa Equipment 61 57 Other^ Various Various 344 540 CARRYING AMOUNT 1 700 1 873 Classified as held for sale (292) TOTAL 1 408 1 873
* The Avis Fleet division has been classified as held for sale as per note 20. ^ The aggregate of the remaining immaterial goodwill balances consists of 12 CGUs in 2019, (2018: 17).
Goodwill is allocated to the appropriate CGUs according to the type of business and where it operates. External and internal factors surrounding the business operations play a role in determining an indication of impairment. In addition, the carrying amount of goodwill is subject to an annual impairment test. 11 GOODWILL continued Impairment of goodwill arises when the recoverable amount of the CGU, including goodwill, is less than the carrying value. The recoverable amount is determined as the greater of the fair value less costs to sell or the value in use. In most instances it is difficult to use the fair value less costs to sell, as a reliable estimate is not easily obtainable in determining the recoverable amount. Therefore the value-in-use method is used to assess the goodwill for impairment. The key assumptions used in the value in use calculation for the CGUs shown above are as follows: A discounted cash flow valuation model is applied using a five-year strategic plan as approved by the board. The financial plans are the quantification of strategies derived from the use of a common strategic planning process followed across the group. The process ensures that all significant risks and sensitivities are appropriately considered and factored into strategic plans. The discount rate applied to the forecast period, has been outlined for each CGU in the table below. Discount rates applied to cash flow projections are based on a country or region-specific discount rate, dependent upon the location of cash-generating segment operations. The pre-tax nominal discount rates applied are as follows:
Geographical Significant CGUs Location Currency 2019 2018 Avis Rent a Car Southern Africa South Africa ZAR 16.3% 14.3% Avis Fleet Southern Africa South Africa ZAR 23.5% – 25.6% 22.2% Equipment Russia Russia USD 12.0% 11.8% BZAMM Rest of Africa USD 18.0% 14.8% Other^ Various Various 14.2% – 19% 14.1% – 23.1%
Long-term growth rates applied to extrapolate cash flows are as follows:
Geographical Significant CGUs Location Currency 2019 2018 Avis Rent a Car Southern Africa South Africa ZAR 5.0% 5.0% Avis Fleet Southern Africa* South Africa ZAR 5.0% 5.0% Equipment Russia Russia USD 2.1% 2.1% BZAMM Rest of Africa USD 2.0% 2.0% Other^ Various Various 2.0% – 5.0% 2.0% – 5.0%
* The Avis fleet division has been classified as held for sale as per note 20. ^ The aggregate for the remaining immaterial goodwill balance consists of 12 cash-generating units in 2019 (2018: 17).
The sensitivity of management’s assumptions as applied in the value in use models is demonstrated below. Specifically, the sensitivity analysis indicates the point at which the headroom of a CGU is reduced to zero (break even). Each sensitivity has been performed independently and not cumulatively across all assumptions. As at 30 September 2019, management have performed sufficient sensitivity analysis to conclude that a reasonably possible change in key assumptions would not cause the carrying amount of the group’s individual CGUs to exceed their value in use. Specifically regarding BZAMM goodwill and indefinite life intangibles, which was the subject of a key audit matter due to its sensitivity, management’s value in use calculation indicated headroom over the carrying amount of R124 million (2018: R3 055 million). The reduction in headroom compared to prior year is due to a higher pre-tax discount rate in 2019 and lower forecasted activity levels at the operating units which impact on projected cashflows. As such, as at 30 September 2019 no impairment of goodwill and/or indefinitely life intangible assets allocated to this CGU was recognised.
54 55 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
11 GOODWILL continued
2019 BZAMM 2019 2018 Headroom Summary Rm Rm Goodwill & Intangibles 61 48 Headroom 124 2 377 Earnings Before Interest and Tax (EBIT) breakeven sensitivity EBIT Margin Breakeven Point* (3.6%) (38.0%) * required % drop in EBIT Margin to reach headroom of R0. Discount rate breakeven sensitivity Discount rate base case 13.2% 12.0% Discount rate breakeven level^ 13.6% 13.6% ^ level of discount rate at which Headroom is reduced to R0 Long-term growth rate breakeven sensitivity Base case growth rate 2.0% 2.0% Growth rate breakeven level** 1.4% 1.4% ** Long-term growth rate can drop to below 0% before the headroom is reduced R0. Five-year working capital (WC) + Capital expenditure breakeven sensitivity***^^ R'million Base case total increase in five-year WC + Capital expenditure (705) 165 Total five-year IC breakeven level (284) (3 005)
*** Required increase in Invested working capital and capital expenditure over the next five years to reduce headroom to R0. ^^ Management is projecting a net reduction in working capital and capital expenditure in order to reduce Invested Capital.
Other key assumptions applied: Inflation rate and GDP growth rate forecasts Forecast inflation and real GDP growth during the forecast period for the countries from which revenue is derived, expenses are incurred, and inventory is purchased are consistent with external sources and shown below:
Real GDP growth (%) 2019 2020 2021 2022 2023 – South Africa 1.7% 2.1% 2.1% 2.2% 2.2% – United States of America 1.9% 1.9% 1.6% 1.6% 1.7% – United Kingdom 1.2% 1.4% 1.6% 1.6% 1.6% – Russia 1.6% 1.7% 1.7% 1.7% 1.7% – BZAMM 2.5% – 4.5% 3.5% – 6% 4.1% – 6.7% 4.1% – 6.7% 4.1% – 6.7%
Inflation (%, annual average) 2019 2020 2021 2022 2023 – South Africa 4.5% 5.5% 5.1% 5.1% 5.1% – United States of America 2.1% 2.6% 2.6% 2.5% 2.5% – United Kingdom 2.1% 1.9% 2.0% 2.0% 2.0% – Russia 5.2% 5.0% 5.0% 5.0% 5.0% – BZAMM 3% – 17.8% 2.9% – 14.6% 3.6% – 10.8% 3.6% – 10.8% 3.6% – 10.8% 11 GOODWILL continued Exchange rate forecasts Exchange rates applied over the forecast period are consistent with external sources and shown below:
Exchange Rates 2019 2020 2021 2022 2023 USD/ZAR – (Average) 15.17 15.21 16.01 16.93 17.37 GBP/ZAR – (Average) 18.59 19.77 20.81 22.01 22.58 EUR/ZAR – (Average) 16.62 18.25 19.21 20.32 20.84
Any reasonably possible change in the key assumptions on which the recoverable amounts are based would not cause the CGU's carrying amount to exceed its recoverable amount.
Reportable 2019 2018 segment to Geographical which the CGU The impairments relate to the following CGUs Location belong Rm Rm Smartmatta South Africa Logistics – 70 Total – 70
During 2018 management made the decision to dispose of SmartMatta, within the Logistics division. Based on assessments of the businesses net realisable value through sale it was determined that the carrying value of goodwill related to this CGU was not recoverable and thus the full goodwill relating to Smartmatta was impaired.
56 57 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
2019 2018 Patents, Custom- Patents, trade- er trade- Customer marks, relation- Total marks, relation- Capital- develop- Supplier ships, intangi- Capital- develop- Supplier ships, Total ised ment relation- order ble ised ment relation- order intangible software costs ships backlog assets software costs ships backlog assets Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm 12 INTANGIBLE ASSETS COST At 1 October 1 096 193 1 336 207 2 832 1 239 202 1 293 187 2 921 Additions 158 4 – – 162 94 6 – 3 103 Deconsolidation of subsidiaries disposed (2) – (65) – (67) (200) – (5) – (205) Disposals (73) 13 – (9) (69) (14) (4) – – (18) Reclassification (6) – – 6 – (21) (11) 8 17 (7) Translation differences 6 – 56 – 62 (2) – 40 38 At 30 September 1 179 210 1 327 204 2 920 1 096 193 1 336 207 2 832 ACCUMULATED AMORTISATION AND IMPAIRMENT At 1 October 785 189 193 135 1 302 843 143 188 104 1 278 Charge for the year 91 9 1 14 115 101 27 1 18 147 Deconsolidation of subsidiaries disposed (2) – – – (2) (159) – (1) – (160) Disposals (47) (8) – (4) (59) (13) (3) – – (16) Impairment^^ – – – – – 16 21 – 13 50 Translation differences 4 – – – 4 (3) 1 5 – 3 At 30 September 831 190 194 145 1 360 785 189 193 135 1 302 CARRYING AMOUNT At 30 September 348 20 1 133 60 1 560 311 4 1 143 72 1 530 Less: Classified as held for sale (note 20) (33) – – – (33) (1) (1) (2) Total group 315 20 1 133 60 1 527 310 3 1 143 72 1 528
^^ The 2018 capitalised software impairment relates to intangible assets of the KLL and Integrated Freight Solutions businesses, both of which are operations within the Logistics division. These intangibles were internally generated software solutions designed to provide a transport management platform for various businesses. Due to either end of contract or the decision to exit loss making operations, the carrying value of these intangible assets was impaired. The remaining impairments arose as a result of measurement basis for non-current assets classified as held-for-sale in the Logistics division, resulting in an impairment loss which reduced the carrying amount of the non-current assets in the disposal group, (in most cases relevant intangible assets were fully impaired). 12 INTANGIBLE ASSETS continued Significant indefinite life intangible assets The group did not acquire intangible assets with indefinite useful lives during the current year (2018: Nil). A detailed breakdown of the carrying value of intangible assets with an indefinite life has been shown below.
Category/Class of 2019 2018 Significant CGUs intangible assets Rm Rm Equipment Russia Supplier relationship 195 182 Equipment South Africa Supplier relationship 277 277 BZAMM Supplier relationship 640 597 Other Supplier relationship 21 85 Total Indefinite life intangible 1 133 1 141 Intangible assets with finite useful lives Supplier relationship – 2 Total carrying value 1 133 1 143
The above indefinite life intangible assets are tested annually for impairment, using the valuation techniques outlined in note 11. The sensitivity analysis has been presented in note 11. The pre-tax nominal discount rate applied as well as the long-term growth rates applied to extrapolate cash flows have been shown below. The pre-tax nominal discount rates applied are as follows: 2019 2018 Significant CGUs Geographical location Currency % % Equipment Russia Russia USD 12.0% 11.8% Equipment South Africa South Africa ZAR 18.0% 18.0% BZAMM Rest of Africa USD 16.8% 14.8% Other South Africa ZAR 14.6% 14.7%
Long-term growth rates applied to extrapolate cash flows are as follows: 2019 2018 Significant CGUs Geographical location Currency % % Equipment Russia Russia USD 2.1% 2.1% Equipment South Africa South Africa ZAR 5.0% 5.0% BZAMM Rest of Africa USD 2.0% 2.0% Other South Africa ZAR 5.0% 5.0%
Refer to note 11 for information regarding the other key assumptions used as well as detail on the valuation method applied in relation to the valuation of the CGUs. The Equipment Southern Africa, South Africa and Russia indefinite life intangible assets classified as supplier relationships relate to dealership agreements. The indefinite useful life is supported by Barloworld’s long-standing relationship with Caterpillar Incorporated, (CAT) as the exclusive CAT mining equipment dealer in South Africa, Southern Africa and parts of Russia.
58 59 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
13 INVESTMENT IN ASSOCIATES AND JOINT VENTURES
(Loss)/Income from associates and joint ventures Carrying value of the investment 2019 2018 2019 2018 Rm Rm Rm Rm Associates* (15) 5 693 70 Joint ventures* 246 230 1 560 1 273 Total per income statement/statement of financial position 231 235 2 253 1 343 Discontinued operations/amounts classified as held for sale (note 20) (67) Total group 231 168 2 253 1 343
* The investment in Irene Khaya Property Investment (Pty) Ltd was incorrectly presented as a joint venture instead of an associate. This was corrected in the current year and re-classified in the prior year.
DETAILS OF MATERIAL JOINT VENTURES Details of material joint ventures at the end of the reporting period are as follows: Proportion of ownership interest Principal Place of and voting rights held by the Name of joint venture activity incorporation group 2019 2018 Bartrac Equipment Limited Caterpillar dealer Mauritius 50% 50%
The joint venture operates in Mauritius and the DRC. Summarised financial information in respect of the group’s material joint venture is set out below, the summarised financial information represents amounts shown in the joint venture's financial statements prepared in accordance with IFRS. 2019 2018 Bartrac Equipment Limited Rm Rm Statement of financial position Cash and cash equivalents 77 35 Total current assets 2 306 1 786 Non-current assets 1 077 789 Current financial liabilities (excluding trade and other payables and provisions) 22 91 Total current liabilities 746 841 Non-current financial liabilities (excluding trade and other payables and provisions) 318 119 Total non-current liabilities 198 Income statement Revenue 4 506 3 266 Depreciation and amortisation (122) (104) Interest income 40 5 Income tax expense 68 110 Net profit after tax 536 501 13 INVESTMENT IN ASSOCIATES AND JOINT VENTURES continued
Reconciliation of the carrying amount of the interest in Bartrac recognised in the 2019 2018 consolidated financial statements Rm Rm Original cost 38 38 Equity accounted earnings to date 1 591 1 322 Dividends (719) (719) Foreign Currency Translation 356 275 Carrying amount of the group’s interest in Bartrac Equipment Limited 1 266 916
Proportion of ownership interest Principal Place of and voting rights held by the Name of Joint Venture activity incorporation group 2019 2018 Supply of Agricultural and Materials Handling BHBW South Africa (Proprietary) Limited goods and services South Africa 50% 50%
Summarised financial information in respect of the group’s material joint venture is set out below, the summarised financial information represents amounts shown in the joint venture's financial statements prepared in accordance with IFRS. 2019 2018 BHBW South Africa (Proprietary) Limited Rm Rm Statement of financial position Total current assets 933 952 Non-current assets 300 212 Current financial liabilities (excluding trade and other payables and provisions) 162 95 Total current liabilities 657 557 Total non-current liabilities 13 7 Income statement Revenue 1 256 1 358 Interest income 16 3 Income tax expense or income 28 19 Net loss after tax (32) (4)
Reconciliation of the carrying amount of the interest in BHBW South Africa (Proprietary) 2019 2018 Limited recognised in the consolidated financial statements Rm Rm Original cost 301 301 Equity accounted (loss)/earnings to date (11) 5 Carrying amount of the group’s interest in BHBW South Africa (Proprietary) Limited 290 306
2019 2018 Aggregate information of other joint ventures that are not individually material: Rm Rm Group’s share of loss (5) (19)
60 61 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
13 INVESTMENT IN ASSOCIATES AND JOINT VENTURES continued
Reconciliation of income statement/statement of financial position Income from joint venture Carrying value of the investment 2019 2018 2019 2018 Rm Rm Rm Rm Bartrac Equipment Limited and BHBW South Africa (Proprietary) Limited 252 249 1 556 1 222 Aggregate loss/carrying value of non-material joint ventures (6) (19) 4 51 Total income and carrying value of joint ventures 246 230 1 560 1 273
DETAILS OF MATERIAL JOINT VENTURES Proportion of ownership interest and voting rights Place of held by the Name of Associates Principal Activity incorporation group 2019 2018 Sale and servicing of motor vehicles and sale NMI Durban South Motors (Pty) Ltd of parts South Africa 50% 0%
Summarised financial information in respect of the group’s material associates is set out below, the summarised financial information represents amounts shown in the associate's financial statements prepared in accordance with IFRS. Barloworld sold a 1.18% shareholding to the non-controlling interest shareholders of NMI Durban South Motors (Pty) Ltd on 1 September 2019, resulting in the loss of control. Revenue of R3 887 million and operating profit of R125 million was consolidated into the group’s results, (representing 11 months of NMI Durban South Motors (Pty) Ltd as a Barloworld controlled subsidiary). Effective 1 September 2019 the results of NMI Durban South Motors (Pty) Ltd have been equity accounted. 2019 2018 NMI Durban South Motors (Pty) Ltd Rm Rm Statement of financial position Cash and cash equivalents 126 Total current assets 1 104 Non-current assets 873 Current financial liabilities (excluding trade and other payables and provisions) 7 Total current liabilities 979 Non-current financial liabilities (excluding trade and other payables and provisions) 143 Total non-current liabilities 153 Income statement Revenue 320 Depreciation and amortisation 2 Income tax expense or income 3 Net profit after tax 8 13 INVESTMENT IN ASSOCIATES AND JOINT VENTURES continued
Reconciliation of the carrying amount of the interest in NMI Durban South Motors (Pty) Ltd 2019 2018 recognised in the consolidated financial statements Rm Rm Cost 451 Fair value gain on deconsolidation of subsidiary 212 Equity accounted earnings to date 4 Dividends (50) Carrying amount of the group’s interest in NMI Durban South Motors (Pty) Ltd 617
2019 2018 Aggregate information of other associate that are not individually material: Rm Rm Group’s share of loss (19)
Reconciliation of income statement/statement of financial position Income/(loss) from associate Carrying value of the investment 2019 2018 2019 2018 Rm Rm Rm Rm NMI Durban South Motors (Pty) Ltd 4 617 Aggregate (loss)/carrying value of other non-material associates^*# (19) 5 76 70 Total (loss)/income and carrying value of associates (15) 5 693 70
^ Included in the carrying value of associates that are not individually material, is Menlyn Main Towers (Pty) Limited, in which Barloworld has a 50% shareholding and Irene Khaya Property Investment (Pty) Ltd, in which Barloworld has a 50% shareholding. These entities are not jointly controlled and as such are classified as associates. * Included in the carrying value of associates is Optron (Pty) Ltd in which Barloworld has a 20% shareholding. # The investment in Irene Khaya Property Investment (Pty) Ltd was incorrectly presented as a joint venture instead of an associate. This was corrected in the current year and re-classified in prior year.
All of the associates and joint ventures are incorporated and operational in South Africa, except:
Name of the Associate/Joint Ventures Principal Activity Place of incorporation Year-end Barzem Enterprises (Pty) Limited Caterpillar dealer Zimbabwe 31 August* Bartrac Equipment Limited Caterpillar dealer Mauritius 30 September Africa United Equipment Liaison Office Hong Kong 31 December*
* The different year ends of the associates and joint ventures listed above do not have a material impact on the group’s financial results.
62 63 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
2019 2018 Rm Rm 14 FINANCE LEASE RECEIVABLES Amounts receivable under finance leases: Net investment 353 540 Less: Unearned finance income (54) (81) 299 459 Classified as held for sale (note 20) (155) Classified as held for sale – included in trade and other receivables (note 18)* (113) Present value of minimum lease payments receivable 31 459 Receivable as follows: Present value Within one year – included in trade and other receivables (note 18)* 29 248 In the second to fifth year inclusive 2 211 31 459 Minimum lease payments Within one year 32 277 In the second to fifth year inclusive 3 263 35 540 Less: Unearned finance income (4) (81) 31 459 Unguaranteed residual values of assets leased under finance leases 42 50
Long-term vehicle fleet is leased to customers for periods ranging from 15 to 60 months. The average lease term is 44 months and the majority of these leases are at interest rates linked to the South African prime rate. The weighted average interest rate on lease receivables for the year 30 September 2019 was 11% per annum (2018: 11%).
2019 2018 Rm Rm 15 LONG-TERM FINANCIAL ASSETS Listed investments at fair value 2 2 Unlisted investments at fair value 62 58 Unlisted debt instruments* 447 755 Other receivables 199 77 Other non-current loans and deposits 17 Total per statement of financial position 710 909
* The group remains invested in dollar linked Angolan government bonds. On maturity the bonds will be settled in Kwanza. At September 2019, the group’s investment in these bonds was $57 million(2018: $66 million) of which the long-term portion was $29 million (2018: $53 million). Restated 2019 2018 Rm Rm 16 DEFERRED TAXATION Movement of deferred taxation Balance at beginning of year – deferred taxation assets 710 683 – deferred taxation liabilities (632) (538) Net asset at beginning of the year 78 145 Reclassified as held for sale at the beginning of the year 18 164 Deferred taxation on adoption of new standards (2) Recognised in income statement this year (2) 34 – Current movements (2) 32 – Rate change adjustment – 2 Recognised in income statement this year – discontinued operation (23) (25) Arising on deconsolidation or disposal of subsidiaries 41 (157) Translation differences 7 (12) Accounted for directly in other comprehensive income 94 (64) Net deferred taxation classified as held for sale (note 20) 195 (18) Other movements (1) 10 Net asset at end of the year 405 78 – deferred taxation assets 761 710 – deferred taxation liabilities (356) (632) Analysis of deferred taxation by type of temporary difference Deferred taxation assets Capital allowances (263) (133) Provisions and payables 350 339 Prepayments and other receivables 187 106 Effect of tax losses 152 101 Retirement benefit obligations 358 298 Other temporary differences (23) (1) 761 710 Deferred taxation liabilities Capital allowances (369) (949) Provisions, long-term loans and payables 49 210 Prepayments and other receivables (36) 31 Effect of tax losses – 68 Other temporary differences – 8 (356) (632)
64 65 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
2019 2018 Rm Rm 17 INVENTORIES Work in progress 786 984 Equipment 6 165 6 940 Vehicles 2 170 2 832 Other inventories 96 114 Inventory provision^ (1 073) (1 242) Total group 8 144 9 629 Classified as held for sale (note 20) (72) (37) Total per statement of financial position 8 072 9 592
The secured liabilities are included under trade and other payables (note 25). Inventories to the value of R1 070 million (2018: R1 385 million) have been encumbered under the Floorplan facilities. 2019 2018 Rm Rm The value of inventories has been determined on the following bases: First-in first-out and specific identification 6 886 8 398 Weighted average 1 186 1 194 8 072 9 592 Inventory recognised as an expense 40 237 45 491
^Included within inventory provision are the following: Amount of write-down of inventory to net realisable value and losses of inventory 193 261 Amount of reversals of inventory previously written down* 60 36 Change in estimate of Rebuild component net realisable value provision** – 130
* The reversal of inventory provisions arose due to changes in selling conditions in the current year against prior year estimates. ** Barloworld-Equipment southern Africa’s finished parts inventory includes rebuilt components. In prior years this segment experienced significant operational challenges which resulted in reduced margins earned on rebuilt components. These factors, together with considering inventory turns, were used in estimating the net realisable value (NRV) of rebuilt components. The segment has been in the process of re-organising, restructuring and improving efficiencies of the remanufacturing processes. The operational efficiency efforts undertaken resulted in the Rebuild Centre being certified by Caterpillar in April 2018. In order to receive certification the Rebuild Centre had to demonstrate excellence in quality, efficiency, capacity, image, administration and continuous improvements. This certification, together with operational efficiencies, has resulted in increased margins being earned on rebuilt components which management believes are sustainable into the foreseeable future. Consequently, the conditions and circumstances of the rebuilding process have changed in the prior year and there is new information available to support margins achieved on, and forecast demand for, rebuilt components. This has resulted in a change in determining the scale applied to estimating the NRV of rebuilt components and in the determination of inventory turns. This change in methodology to estimate the NRV provision recognised against rebuilt components is considered a change in estimate in accordance with IAS 8 Accounting policies, changes estimates and errors. This change has been accounted for prospectively as at 30 September 2018 and has been included in the closing balance of the inventory provision as at 30 September 2018. Applying the previous methodology, the NRV provision against rebuild components would have increased by R75 million in 2018 (income statement charge of R75 million). The revised estimate resulted in a reduction in the NRV provision against rebuilt components of R205 million. Therefore the net impact recognised in the income statement as income for the 2018 financial year was R130 million. 18 TRADE AND OTHER RECEIVABLES AND CONTRACT ASSETS
2019 2018 Rm Rm 18.1 TRADE AND OTHER RECEIVABLES Trade receivables 6 709 7 716 Less: Allowance for doubtful receivables (798) (770) Net trade receivables 5 910 6 946 Finance lease receivables (note 14) 142 248 Fair value of derivatives 49 1 Unlisted debt instruments* 411 155 VAT receivables 280 235 Prepayments 297 473 Other receivables 1 066 993 Total group 8 156 9 051 Classified as held for sale (note 20) (772) (168) Total per statement of financial position 7 384 8 883
* The group remains invested in dollar linked Angolan government bonds. On maturity the bonds will be settled in Kwanza. At September 2019, the group's investment in these bonds was $57 million (2018: $64 million) of which the short-term portion was $28 million (2018: $13 million).
2019 2018 Rm Rm Expected credit losses (ECL)** At 1 October IAS 39 770 671 Adjustment upon application of IFRS 9 (refer to note 33.1.2) (17) At 1 October under IFRS 9 753 671 Additional allowance charged to profit or loss 247 233 Allowance reversed to profit or loss (173) (70) Transfer to credit-impaired 3 – Transfer from credit-impaired (7) – Allowance written off*** (42) (46) Reclassification 21 Disposal of subsidiaries (3) (49) Translation 20 10 At 30 September 798 770 Classified as held for sale (note 20) (205) (4) Total per statement of financial position 593 766
** The group measures the loss allowance for trade receivables at an amount equal to the lifetime ECL. Refer to note 31 for further analysis of credit risk-related to ECL. *** The carrying amount of trade receivables that are credit impaired, written off, but still subject to recovery is R4.3 million.
66 67 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
18 TRADE AND OTHER RECEIVABLES AND CONTRACT ASSETS continued
2019 Rm 18.2 CONTRACT ASSETS Balance at 1 October 1 214 Recognition of revenue (using percentage of completion) 4 258 Transfer to receivables (on invoicing) (4 488) Expected credit losses (refer to reconciliation below) (4) Translation differences 1 Total group 981
Amounts relating to contract assets are balances due from customers in the Equipment and Logistics divisions that arise, to represent the group's right to consideration, when the group performs the contracted performance obligations over time for which payment is conditional on completion of the performance obligation. Per the policy note number 33, the contract asset is reclassified to trade receivables at the point at which it is invoiced to the customer. 2019 Rm Expected credit losses (ECL) At 1 October under IFRS 9 – Additional allowance charged to profit or loss* (4) Total group (4)
Please refer to accounting policy on pages 14 to 23 for more detail. 2019 2018 Rm Rm 19 CASH AND CASH EQUIVALENTS Cash on deposit 6 463 7 384 Other cash and cash equivalent balances 840 528 Total group 7 303 7 912 Classified as held for sale (note 20) (77) (19) Total per statement of financial position 7 226 7 893 Per currency: South African Rand 1 833 2 889 Foreign currencies 5 393 5 004 7 226 7 893 Cash balances not available for use due to insurance reserving and foreign exchange restrictions 188 178
This includes R157 million ($10.3 million) of Angolan Kwanza (2018: R140 million ($9.9 million)). 20 DISCONTINUED OPERATIONS AND ASSETS CLASSIFIED AS HELD FOR SALE
In September 2019 management took a firm decision to dilute the group's interest in the Avis Fleet business. Barloworld intends to form a joint venture and reduce it’s shareholding to 50%. As at 30 September 2019 management are confident that, based on the progress to date, this transaction will be executed in the next 12 months. Avis fleet represents a significant line of business and has therefore been disclosed as a discontinued operation at 30 September 2019, with the comparative 2018 financial information re-stated accordingly together with the Iberia segment. 2019 2018 Rm Rm Results from discontinued operations as reported are as follows: Revenue 3 372 6 663 Operating profit before items listed below 1 500 1 657 Impairment losses on financial assets and contract assets (49) Depreciation (826) (871) Amortisation of intangible assets (8) Operating profit 625 778 Fair value adjustments on financial instruments (9) (11) Finance costs excluding finance charges on group debt (note 2 below) (49) (39) Income from investments 11 7 Profit before non-operating and capital items 577 735 Non-operating and capital items (12) 9 Profit before taxation 566 744 Taxation* (79) (109) Net profit of after taxation 487 635 Loss from associates# (67) Profit from discontinued operations excluding finance charges on group debt (note 2 below) 487 568 Current year adjustment to the profit on disposal of Equipment Iberia^ 33 Net profit on disposal of discontinued operations@ 1 600 Profit from discontinued operations per income statement 519 2 168 Profit on discontinued operations to the owners of Barloworld Limited after non-controlling interest 513 2 155
* The inclusion of R277 million of finance charges in continuing operations has impacted the effective tax rate (ETR) of Avis fleet. The ETR of Avis fleet excluding these finance charges is 14% and 27% including these finance charges. # Loss from associates at 30 September 2018 included an impairment on investment R47 million. ^ In the current year certain tax uncertainties related to our Iberian operations were resolved resulting in the reversal of previously held provisions totaling R33 million. This is a change in estimates in the year and as such has been accounted for prospectively through non-operating and capital items in the income statement. @ Net profit on disposal of Equipment Iberia included R1.5 billion that related to the recycling of the foreign currency translation reserves since acquisition. 2019 2018 Rm Rm The cash flows from the discontinued operation are as follows: Cash flows from operating activities 404 396 Cash flows from investing activities 25 (8) Cash flows from financing activities (76) 135
68 69 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
20 DISCONTINUED OPERATIONS AND ASSETS CLASSIFIED AS HELD FOR SALE continued The major classes of assets and liabilities classified as held for sale are as follows: Total Held for Sale Equipment1 Automotive2 Logistics3 Corporate4 2019 Rm Rm Rm Rm Rm Property plant and equipment 4 358 70 4 183 12 93 Goodwill 292 292 Intangible assets 33 31 2 Long term finance lease receivables 155 155 Deferred tax asset 21 5 16 Inventories 72 59 13 Trade and other receivables 772 680 92 Cash and cash equivalents 77 48 29 Total assets classified as held for sale* 5 780 70 5 453 164 93 Deferred tax liability (216) (216) Total non current payables (341) (341) Short- and long-term contract liabilities (26) (26) Bank overdraft and short term loans (561) (561) Total current payables (938) (878) (60) Short-term provisions (133) (115) (18) Tax provision (7) (7) Total liabilities associated with assets classified as held for sale** (2 222) (2 144) (78) Net assets classified as held for sale 3 558 70 3 309 86 93
1. This refers to properties within the Equipment division that are in the process of being sold. 2. This represents the assets and liabilities of the Avis Fleet business classified as held for sale and a discontinued operation. 3 Assets held for sale in the Logistics business include Middle East and SmartMatta. Whilst there have been a number of unforeseen challenges to executing on these sale transactions in the year, management remain committed to exiting these businesses and are confident that these assets will be disposed of in the coming 12 months based on the progress made towards closing the disposal of the Middle East and the recent relaunch of the SmartMatta disposal process. 4 The assets held for sale within the Corporate division relate to the Barlow Park property owned by Barloworld Limited which is in the process of being sold into a consortium of investors with the aim of redeveloping the site into a multi-use precinct. There have been unexpected delays in the commencement of this project, however, there has been good progress in the latter part of the year and it is expected that the consortium will be in a position to commence operations in the coming 12 months. * Includes financial assets of R1 006 million. ** Includes financial liabilities measured at amortised cost of R1 847 million.
The group operates a central treasury function which, as at 30 September 2019, had allocated debt of R2,8 billion (2018: R2.8 billion) to fund the Avis Fleet operations. This debt is recognised in continuing operations of the group together with the associated finance charges of R277 million. On disposal of the Avis Fleet business this group debt will either be repaid or the facilities will be re-allocated to other value adding opportunities. Refer to below for a reconciliation of the Avis Fleet results and the net assets to reflect this finance cost and debt allocation.
2019 2018 Profit from discontinued operations of Avis Fleet as reported 487 521 Finance costs on group treasury funding of the Avis Fleet operations (277) (268) Adjusted profit from Avis Fleet before non-controlling interest 210 253 Net assets of the discontinued operations of Avis Fleet as reported 3 558 Group treasury allocation of debt funding to the Avis Fleet operations (2 794) Adjusted net assets of Avis Fleet 764 20 DISCONTINUED OPERATIONS AND ASSETS CLASSIFIED AS HELD FOR SALE continued
Total Held for Sale Logistics1 Corporate2 2018 Rm Rm Rm Property, plant and equipment 253 160 93 Deferred taxation asset^ 18 18 Intangible assets 2 2 Inventories 37 37 Trade and other receivables* 168 168 Cash balances 19 19 Assets classified as held for sale 497 404 93 Trade and other payables – short and long-term** (125) (125) Bank Overdraft (1) (1) Total liabilities associated with assets classified as held for sale (126) (126) – Net assets classified as held for sale 371 278 93
1. Assets held for sale in Logistics in 2018 were the KLL, SmartMatta and Middle East businesses. 2. The net assets held for sale within the Corporate division relate to the Barlow Park property owned by Barloworld Limited. * Includes financial assets of R63 million. ** Includes financial liabilities measured at amortised cost of R83 million.
2019 2018 Rm Rm 21 SHARE CAPITAL AND PREMIUM Authorised share capital 500 000 (2018: 500 000) 6% Non-redeemable cumulative preference shares of R2 each 1 1 400 000 000 (2018: 400 000 000) Ordinary shares of 5 cents each 20 20 21 21 Issued share capital 375 000 (2018: 375 000) 6% Non-redeemable cumulative preference shares of R2 each 1 1 212 692 583 (2018: 212 692 583) Ordinary shares of 5 cents each 11 11 12 12 Share premium 429 429 Total issued share capital and premium 441 441 Issued shares: Number of shares in issue at beginning of year 212 692 583 212 692 583 Less treasury shares (note 3 below) (1 423 734) (1 570 042) Net number of ordinary shares in issue at end of year 211 268 849 211 122 541 Unissued shares (note 1 below): Ordinary shares reserved to meet the requirements of the Barloworld Share Option Scheme (note 2 below) 23 129 182 23 129 182 Ordinary shares 164 178 235 164 178 235 187 307 417 187 307 417 6% Non-redeemable cumulative preference shares 125 000 125 000
Notes: 1. The directors have no general authority to issue shares. 2. The shareholders at the general meeting on 20 January 2005 reserved shares for the purpose of the Barloworld Share Option Scheme. 3. Reconciliation of Treasury shares:
70 71 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
21 SHARE CAPITAL AND PREMIUM continued
Restated 2019 2018 Rm Rm Balance on 1 October 2018 1 570 042 Acquisition of shares for employee share-based scheme 861 410 Shares vested and exercised (887 788) Shares lapsed in term of the employee share scheme (119 930) Balance on 30 September 2019 1 423 734
The directors have a general authority to buy back up to 10% of the ordinary shares issued by the company. At the general meeting of the company held on 14 February 2019 to approve the group's B-BBEE transaction Khula Sizwe, Barloworld shareholders approved the issue of 6 578 121 shares to the Barloworld Empowerment Foundation. These shares will be issued by the Company in the first quarter of the 2020 financial year. 2019 2018 Rm Rm 22 INTEREST-BEARING LIABILITIES Total long-term borrowings (note 31.2)* 6 754 8 118 Less: Current portion redeemable and repayable within one year (note 26) (2 133) (2 123) Total per Statement of Financial Position 4 621 5 995
Total Total owing Repayable during the year ending 30 September owing 2024 and 2019 2020 2021 2022 2023 onwards 2018 Summary of group borrowings by currency and by year of redemption or repayment Rm Total South African Rand 6 521 1 900 345 3 536 679 61 7 767 Total foreign currencies 233 233 351 Total South African Rand and foreign currency liabilities 6 754 2 133 345 3 536 679 61 8 118
Net book value of assets Liabilities secured encumbered 2019 2018 2019 2018 Included above are secured liabilities as follows: Rm Rm Rm Rm Secured liabilities Secured loans South African Rand 102 22 403 Liabilities under capitalised finance leases (note 28) South African Rand 341 528 362 468 Foreign currencies 96 Total secured liabilities 341 726 384 871 Assets encumbered are made up as follows: Property, plant and equipment 384 871 384 871 22 INTEREST-BEARING LIABILITIES continued Included in interest-bearing liabilities
Comparable 2019 2018 Certificate Issued Maturity Treasury Stock Spread bps Yield % Type Rm Rm BAW11 14-Jun-11 1-Oct-18 R204 156 9.80 Fixed rate (NACS) 460 BAW17 5-Dec-13 5-Dec-18 3-month Jibar 148 8.49 Floating rate 714 BAW18 5-Dec-13 5-Dec-20 3-month Jibar 170 8.51 Floating rate 355 355 BAW19 5-Dec-13 5-Dec-20 208 167 9.56 Fixed rate (NACS) 472 472 BAW21 24-Mar-15 24-Mar-22 208 210 9.30 Fixed rate (NACS) 710 710 BAW22 7-Dec-15 7-Dec-22 3-month Jibar 200 8.81 Floating rate 252 252 BAW24 30-Sep-16 30-Sep-19 3-month Jibar 185 8.88 Floating rate – 501 BAW25 9-May-17 8-May-20 3-month Jibar 180 8.64 Floating rate 582 582 BAW26U 11-May-17 11-May-21 3-month Jibar 195 8.79 Floating rate 250 250 BAW27U 11-May-17 11-May-22 3-month Jibar 210 8.94 Floating rate 250 250 BAW28 6-Jun-17 6-Jun-22 3-month Jibar 205 8.86 Floating rate 500 500 BAW29 22-Feb-18 22-Feb-23 3-month Jibar 180 8.63 Floating rate 400 400 BAW30 5-Dec-18 5-Dec-21 3-month Jibar 139 8.20 Floating rate 700 BAW31 30-Sep-19 30-Sep-22 3-month Jibar 130 8.09 Floating rate 500 Fees Capitalised (6) (6) 4 965 5 440
2019 2018 Rm Rm 23 PROVISIONS Non-current 102 47 Current 640 1 100 Total group 742 1 147 Classified as held for sale (note 20) (133) – Total per statement of financial position 609 1 147
72 73 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
23 PROVISIONS continued
Total Warranty Maintenance 2019 claims contracts Other Movement of provisions Rm Rm Rm Rm Balance at beginning of year per statement of financial position 1 147 315 611 221 Reclassified to contract liabilities (540) 47 (587) Amounts added 702 319 17 366 Amounts used (481) (370) (3) (108) Amounts reversed unused (99) (22) (2) (75) Deconsolidation of subsidiaries (3) (3) Translation adjustments 16 9 7 Total group 742 298 36 408 Classified as held for sale (note 20) (133) (36) (97) Total per statement of financial position 609 298 – 311 To be incurred 2019 Within one year 507 284 223 Between two to five years 97 14 83 More than five years 5 5 609 298 311 2018 Within one year 1 100 310 597 193 Between two to five years 47 5 14 28 1 147 315 611 221
Warranty claims The provisions relate principally to warranty claims on capital equipment, spare parts and services. The estimate is based on claims notified and past experience.
Maintenance contracts This relates to deferred revenue on maintenance and repair contracts on equipment and motor vehicles. Assumptions include the estimation of maintenance and repair costs over the life-cycle of the assets concerned. The timing of these cash flows is an area of judgement. Further details regarding insurance contracts related to the provision of maintenance contracts are included in note 30. 2019 2018 Rm Rm 24 OTHER NON-CURRENT LIABILITIES Retirement benefit obligation 2 111 1 753 Deferred income maintenance contract 341 340 Other payables 146 150 Total group 2 598 2 243 Classified as held for sale (note 20) (341) – Total per statement of financial position 2 257 2 243 24 OTHER NON-CURRENT LIABILITIES continued RETIREMENT BENEFIT INFORMATION It is the policy of the group to encourage, facilitate and contribute to the provision of retirement benefits for all permanent employees. To this end the group's permanent employees are usually required to be members of either a pension or provident fund, depending on their preference and local legal requirements. Altogether 83% of employees belong to one defined benefit and nine defined contribution retirement funds in which group employment is a prerequisite for membership. Of these, the defined benefit and five defined contribution funds are located outside of South Africa and accordingly are not subject to the provisions of the Pension Funds Act of 1956.
Defined contribution plans The total cost charged to profit or loss of R970 million (2018: R861 million) represents contributions payable to these schemes by the group at rates specified in the rules of the schemes (note 3).
Defined benefit plans The group sponsors a funded defined benefit scheme for qualifying employees in the United Kingdom. The UK defined benefit scheme is administered by a board of trustees which manages the assets held in trust for the benefit of the scheme members. The trustee board of the pension scheme is composed of one employer representative, one member-nominated representative and one independent professional trustee. The trustee board is required by the trust deed and rules, pension law and by its articles of association to act in the interests of all relevant stakeholders in the scheme, i.e., current employees, former employees, retirees, and dependents. The scheme closed to future accrual on 31 December 2016. The scheme exposes the Company to a number of risks, the most significant of which are: Changes in bond yields A decrease in corporate bond yields will increase the value placed on the scheme's liabilities, although this will be partially offset by an increase in the value of the scheme's bond holdings. Asset volatility The liabilities are calculated using a discount rate set with reference to corporate bond yields. If assets underperform this yield, this will create a deficit. The scheme holds a significant proportion of growth assets (equities and absolute return funds) which, though expected to outperform corporate bonds in the long-term, create volatility risk in the short-term. The allocation to growth assets is monitored to ensure it remains appropriate given the scheme's long-term objectives. Inflation risk A significant proportion of the scheme's benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The majority of the assets are either unaffected by, or only loosely correlated with, inflation, meaning that an increase in inflation will also increase the deficit. Life expectancy The majority of the scheme's obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the liabilities.
As the scheme is closed to future accrual, future contributions into the scheme comprise solely recovery plan contributions if considered necessary. Following the latest triennial valuation at 1 April 2017 the deficit is planned to be funded via recovery plan contributions and investment returns from return-seeking assets. The current recovery plan contribution is £13 million per year over eight years up to 1 April 2026. In the event that dividends exceed £13 million in a year, it has been agreed that an additional contribution will be required to match the dividend. As part of the group's UK capital reduction plan it has been agreed with the Trustees that the employer will make a further £30 million contribution towards the deficit to match the dividend of £30 million paid from the UK (refer to timing of these payments below). In the 2019 year the following contributions were made:
£m Shortfall from 2018 contributions 3 2019 contributions 13 Additional contributions – UK capital reduction plan* 6 Total contributions in FY19 22
* An additional amount of £24 million is payable in the 2020 financial year
74 75 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
24 OTHER NON-CURRENT LIABILITIES continued Amounts recognised in the Income Statement in respect of defined benefit schemes are as follows: 2019 2018 Rm Rm Past service cost 88 Plan administration expenses 11 14 Net loss recognised in profit or loss (note 3) 99 14 Net interest expenses 49 57 Components of defined benefit costs recognised in profit or loss 148 71 Actual return on plan assets 1 083 314
The scheme is valued by independent actuaries on a triennial basis with the valuation as at 1 April 2017 being the most recent valuation completed. The scheme’s IAS 19 accounting valuation at 30 September 2019 reflected a deficit of £113 million (R2.1 billion) which represents an increase compared to the deficit in 2018 of £95 million (R1.8 billion). The discount rate decreased from 2.9% in 2018 to 1.9% in 2019. The decreased discount rate resulted in increased liabilities but asset returns were in excess of expectation and the company made a recovery plan contribution of £22 million, which partially countered the increased liabilities. The trustee board carry out a strategic investment review following completion of each triennial valuation to ensure that the assets are managed in a manner appropriate to the nature and duration of the expected future retirement benefits payable under the scheme. The trustee board and the group are actively considering mechanisms to reduce risk in the scheme. The scheme has concluded two buy-ins with a value of £120 million. The trustee intends to continue to seek risk mitigation opportunities to reduce scheme volatility and match liabilities as far as possible. The interest rate hedging was increased from 36% to approximately 60% in the year, including the buy-in policies. The scheme invests in long-dated investments through use of bonds which match the duration of the liabilities. The scheme’s assets consist primarily of equities (local and offshore), corporate bonds and insurance policies. The markets performed well resulting in strong returns from the equity and bond markets, which resulted in returns being £44.8 million (R837 million) higher than projected. Following a UK High Court case concluded in 2018, the equalisation of the guaranteed minimum pensions (GMP) was confirmed. The IAS 19 balance sheet liabilities include an allowance of £4.7m (R88 million) for the potential costs of equalising GMP for the impact between males and females. This cost is recognized as a past service cost in the current year’s pension expense. The amount included in the balance sheet arising from the group’s obligations in respect of the defined benefit Scheme is set out below: 2019 2018 Rm Rm Present value of funded obligation 11 891 10 533 Fair value of plan assets 9 780 8 780 Net liability per statement of financial position 2 111 1 753 Movement in present value of funded obligation: At beginning of year 10 533 11 123 Past service cost 88 Interest cost 301 281 Actuarial gains arising from changes in demographic assumptions (168) (69) Actuarial losses/(gains) arising from changes in financial assumptions 1 613 (367) Actuarial (gains)/losses arising from experience (30) 107 Benefits paid (582) (732) Exchange differences 136 190 At end of year 11 891 10 533 24 OTHER NON-CURRENT LIABILITIES continued
2019 2018 Rm Rm Movement in fair value of plan assets: At beginning of year 8 780 8 886 Interest income 252 224 Actuarial gains recognised in the statement of comprehensive income 827 86 Plan administration expenses (11) 14 Contributions 402 183 Benefits paid (582) (732) Exchange differences 112 119 At end of year 9 780 8 780 Cumulative actuarial losses 3 945 3 358 Plan assets consist of the following: – Equity instruments (%) 39 51 – Bonds (%) 24 45 – Cash (%) 37 4
The defined benefit funds was valued by an independent actuary as follows: Latest Valuation statutory interval valuation Barloworld UK Pension Scheme Triennial 2017
The next triennial valuation is scheduled for April 2020. Key assumptions used:
2019 2018 Discount rate (%) 1.9 2.9 Expected rate of salary increases (%) 3.0 3.2 Future pension increases (%) 2.9 3.1 Mortality (table using year of birth) S2PA S2PA
Total income Defined Operating statement Scheme benefit expenses Net interest expense assets obligation Deficit Sensitivity to key assumptions £000 £000 £000 £000 £000 £000 Current values 716 1 742 2 458 523 433 (636 432) (112 999) Following a 0.2% p.a. increase in the discount rate 716 1 922 2 638 526 041 (660 427) (134 386) Following a 0.2% p.a. increase in the inflation assumption 716 2 061 2 777 525 630 (655 397) (129 767) Following a 0.25% increase in the long-term rate of improvement for post-retirement mortality 716 2 198 2 914 528 895 (665 971) (137 076)
In assessing the group’s post-retirement liabilities, the group, following actuarial advice, has used standard mortality tables adjusted to reflect the mortality experience of the Defined Benefit Scheme. The mortality assumption remained consistent with the prior year.
76 77 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
25 TRADE AND OTHER PAYABLES AND CONTRACT LIABILITIES
2019 2018 Rm Rm 25.1 TRADE AND OTHER PAYABLES Trade and other payables 9 033 9 649 Interest-bearing floor plans 1 230 1 589 Fair value of derivatives 38 9 Total group 10 301 11 247 Classified as held for sale (note 20) (938) (125) Total per statement of financial position 9 363 11 122
Refer note 17 for details of inventory pledged as security for payables. 2019 Rm 25.2 CONTRACT LIABILITIES Current portion 611 Non-current portion 16 Total group 627 Classified as held for sale (note 20) (26) Total per statement of financial position 601 Balance at 1 October 560 New contracts (amounts) 214 Amounts recognised in revenue (prior year) (22) Amounts recognised in revenue (current year) (127) Translation adjustments 2 Total group 627 Classified as held for sale (note 20) (26) Total per statement of financial position 601
Please refer to accounting policy note 6 for more detail.
The transaction price allocated to (partially) unsatisfied performance obligations at 30 September 2019 are as set out below. Expected to be recognised as follows Equipment Total Within 1 year 2-5 years Workshop and in-field support services 4 943 4 943 After sales equipment services 20 20 Fitment and repairs 22 22 4 985 4 985 Logistics Supply chain management services 2 851 938 1 913 2 851 938 1 913 2019 2018 Rm Rm 26 AMOUNTS DUE TO BANKERS AND SHORT-TERM LOANS Bank overdrafts and acceptances 812 1 724 Short-term loans 303 628 Commercial paper 500 700 Current portion of long-term borrowings (note 22) 2 133 2 123 Total group 3 748 5 175 Classified as held for sale (note 20) (561) (1) Total per statement of financial position 3 187 5 174 Per currency: South African Rand 2 222 4 016 Foreign currencies 965 1 158 3 187 5 174
Refer to note 31.2(b)(ii) for salient loan terms and interest rate sensitivity analysis. 2019 2018 Rm Rm 27 DIVIDENDS Ordinary shares Final dividend No 180 paid on 14 January 2019: 317 cents per share (2018: No 178 – 230 cents per share) 674 564 Interim dividend No 181 paid on 10 June 2019: 165 cents per share (2018: No 179 – 145 cents per share) 350 308 Paid to Barloworld Limited shareholders 1024 872 Paid to non-controlling shareholders 33 81 1057 953 Analysis of dividends declared in respect of current year's earnings: 2019 2018 Ordinary dividends per share Cents Cents Interim dividend 165 145 Final dividend 297 317 462 462 Special dividend per share 228
A special dividend of 228 cents was declared by the board on 18 November 2019 (subject to South African Reserve Bank approval).
6% cumulative non-redeemable preference shares Preference dividends totaling R22 500 were declared on each of the following dates:
°° 21 May 2019 (paid on 24 June 2019) °° 1 October 2018 (paid on 5 November 2018)
78 79 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
2019 2018 Rm Rm 28 COMMITMENTS Capital expenditure commitments to be incurred: Contracted – Property, plant and equipment 197 340 Contracted – Vehicle rental fleet 865 1 131 Approved but not yet contracted 117 216 Total continuing operations 1 179 1 687 Discontinued operation 107 Total group 1 286 1 687 Share of joint ventures’ capital expenditure commitments to be incurred: Approved but not yet contracted 135
Capital expenditure will be financed by funds generated by the business, existing cash resources and borrowing facilities available to the group. Lease commitments: Long-term Medium-term Short-term 2019 2018 > 5 years 2 – 5 years <1 year Total Total Operating lease commitments Rm Rm Rm Rm Rm Land and buildings 487 1 090 440 2 017 2 300 Motor vehicles 17 428 293 738 616 Capital equipment and other 74 401 475 523 Total continuing operations 504 1 592 1 134 3 230 3 439 Discontinued operations 16 20 7 43 Total group 520 1 612 1 141 3 273 3 439
Operating leases related to the Khula Sizwe B-BBEE deal have not been included as Khula Sizwe will be consolidated into the Barloworld group in 2020. Land and building commitments include the following items:
–– Commitments for the operating and administrative facilities used by the majority of business segments. The average lease term is five to ten years. Most lease contracts contain renewal options at fair market rates and those that do not are closely managed where necessary. –– Properties used for office accommodation and used car outlets in the major southern African cities. Rentals escalate at rates which are in line with the historical inflation rates applicable to the southern African environment. Lease periods do not exceed five years. –– Properties at airport locations. The leases are in general for periods of five years and the rental payments are based on a set percentage of revenues generated at those locations subject to certain minimums. Motor vehicle commitments are mainly for vehicles in our Logistics and Equipment segments. The average lease term is two to ten years. Capital equipment and other commitments mainly consists of lease agreements for lifting equipment, office containers, photocopiers and printers. 28 COMMITMENTS continued
Long-term Medium-term Short-term 2019 2018 > 5 years 2 – 5 years <1 year Total Total Finance lease commitments Rm Rm Rm Rm Rm Present value of minimum lease payments 28 Land and buildings 47 17 3 67 159 Motor vehicles 144 111 255 369 Capital equipment and other 15 4 19 97 Total group 47 176 118 341 625 Minimum lease payments Land and buildings 71 50 13 134 254 Motor vehicles 156 127 283 420 Capital equipment and other 17 6 23 115 Total including future finance charges 71 223 146 440 789 Future finance charges (99) (164) Total group 71 223 146 341 625
Land and building commitments are for certain fixed rate leases with an average term of ten to fifteen years including a purchase option at the end of the term on certain leases. 2019 2018 Rm Rm 29 CONTINGENT LIABILITIES Performance guarantees given to customers and other guarantees and claims 1 653 872 Buy-back and repurchase commitments not reflected on the statement of financial position 114 94
As at 30 September 2019 there were no contingent liabilities within Avis Fleet. The increase in contingent liabilities is a result of guarantees issued to NMI Durban South Motors (Pty) Ltd (previously a subsidiary of the group and now an associate), BHBW (JV) and an increase in risk share agreements and guarantees in Equipment southern Africa and Russia. Certain risk share customers have pledged collateral of R350 million (2018: R232 million) as security against these contingent liabilities. During 2018 the Barloworld Equipment division entered into a Risk Share Agreement with Caterpillar Financial Corporation Financeira, S.A., E.F.C. – Sucursal em Portugal and Barloworld Equipment UK Limited. The Risk Share Agreement only relates to certain agreed upon customer risk profiles and relates to exposure at default less any recoveries. As at 30 September 2019 the maximum exposure of this guarantee was estimated to be R294 million (2018: R278 million) representing 25% of the capital balance outstanding. During 2018 the Barloworld Equipment division entered into Risk Share Agreement with Caterpillar Financial Corporation. The Risk Share Agreement only relates to certain agreed upon customer risk profiles and relates to exposure at default less any recoveries. As at 30 September 2019 the gross maximum exposure of this guarantee was estimated to be R116 million representing 25% of the capital balance outstanding. In October 2017, the Barloworld Equipment South Africa (BWE SA) business received notification from the Competition Commission that it is investigating a complaint against the Contractors Plant Hire Association of which Barloworld Equipment was a member. The matter is ongoing but no action has been taken by the Competition Authorities. The company and its subsidiaries are continuously subject to various tax audits in the territories in which they operate. While in most cases the companies are able to successfully defend the tax positions taken, the outcomes of some of the audits are being disputed. Where, based on our own judgment and the advice of external legal counsel, we believe there is a probable likelihood of the group being found liable, adequate provisions have been recognised in the financial statements. The Namibian Directorate Customs and Excise audit matter reported on at 30 September 2018 was resolved in the period with the outcome being the imposition of a nominal administrative penalty.
80 81 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
30 INSURANCE CONTRACTS
Certain transactions are entered into by the group as insurer which falls within the definition of insurance contracts per IFRS 4 Insurance Contracts.
–– The following are included as part of Equipment's maintenance contracts, provision of parts and components, on-site labor, support staff and assets (e.g. vehicles, computers, tooling) to the customer combined with expertise, in order to maintain the customers fleet. –– All full maintenance lease contracts are included in Automotive's insurance contracts and all upfront maintenance contracts Avis Fleet administer on behalf of original equipment manufacturer (OEM) are excluded. 2019 2018 Rm Rm Continuing operations Income (1 352) (1 473) Expenses 1 135 1 158 Net cash flow 1 481 373 Discontinued operations Income (480) (494) Expenses 331 341 Liabilities: At the beginning of the year 1 097 1 110 Amounts added 452 607 Amounts used (280) (425) Amounts reversed unused (158) (174) Fair value adjustment on discount effect (4) 43 Disposal of subsidiaries (65) Amounts reclassified as held for sale (631) Translation difference 1 At the end of the year 477 1 097 Maturity profile: Within one year 477 757 Two to five years 340 477 1 097 Assets: At the beginning of the year 1 546 191 Amounts added 1 537 1 355 Amounts used (2 855) 3 Disposal of subsidiaries (3) At the end of the year 228 1 546 Age analysis of items overdue but not impaired: Overdue 30 to 60 days 186 1 537 Overdue 60 to 90 days 34 3 Overdue 90+ days 8 6 228 1 546 30 INSURANCE CONTRACTS continued Significant assumptions and risks arising from insurance contracts: Maintenance contracts Maintenance contracts are offered to customers in the equipment and automotive segments. The contracts are managed internally through ongoing contract performance reviews, review of costs and regular fleet inspections. Risks arising from maintenance contracts include component lives, component failure and cost of labor. The contracts consist of a variety of forms but generally include cover for regular maintenance as well as for repairs due to breakdowns and component failure which is not covered by manufacturer's warranties or other external maintenance plans. The amounts above include the estimated portion of contracts that meet the definition of an insurance contract. If the costs incurred exceeds the revenue over the expected life of the policy, the future losses are accounted for immediately in profit and loss based on the present value of the contract loss. In Automotive the assets and liabilities are measured based on actuarial valuations and in Equipment these contracts are valued based on cash flow projections. Financial risk mainly relates to credit risk but credit quality of customers which is generally considered to be strong. Risks are spread over a large and diverse customer base; across fleets of equipment and vehicles; and geographically across southern Africa and Europe. 31 FINANCIAL INSTRUMENTS
The group adopted IFRS 9 retrospectively on 1 October 2018, without restating comparative information. The group also adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosure. Accordingly, information relating to 30 September 2018 does not reflect the requirements of IFRS 9 but rather those of IAS 39 Financial Instruments: Recognition and Measurement. Refer to note 33 for details regarding the initial application of IFRS 9 and the resulting impact. The group continues to apply the hedge accounting requirements of IAS 39. The group's financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, bank borrowings, money and capital market borrowings, leases, hire-purchase agreements discounted with recourse and derivatives. Details of the amounts discounted with recourse are included in note 30. Derivative instruments are used by the group for hedging purposes. Such instruments include forward exchange, currency option contracts and interest rate swap agreements. The group does not speculate in the trading of derivative instruments.
82 83 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
31 FINANCIAL INSTRUMENTS continued
31.1 CATEGORIES OF FINANCIAL INSTRUMENTS
2019 2019 Fair value Fair value through other TOTAL Assets through profit comprehensive Finance lease FINANCIAL Non-financial held for TOTAL and loss income (OCI)* Amortised cost receivables ASSETS assets sale AMOUNT Notes Rm Rm Rm Rm Rm Rm Rm Rm ASSETS Finance lease receivables 14 157 157 – (155) 2 Long-term financial assets 15 64 613 677 33 710 Trade and other receivables 18 4 45 6 321 142 6 512 1 644 (772) 7 384 Cash and cash equivalents 19 7 303 7 303 (77) 7 226 Total assets 68 45 14 237 299 14 649 1 677 (1 004) 15 322
2019 2019 Fair value Fair value through other Liabilities through profit comprehensive TOTAL FINANCIAL Non-financial held TOTAL and loss income (OCI)* Amortised cost LIABILITIES liabilities for sale AMOUNT Notes Rm Rm Rm Rm Rm Rm Rm LIABILITIES Interest-bearing non-current liabilities 22 4 621 4 621 – – 4 621 Other non-current liabilities 24 146 146 2 111 2 257 Trade and other payables 25 37 1 8 792 8 830 1 471 (938) 9 363 Amounts due to bankers and short-term loans 26 15 3 732 3 747 1 (561) 3 187 Total liabilities 37 16 17 291 17 344 3 583 (1 499) 19 428
* This relates to forward exchange contracts that are part of a cash flow hedging relationship. 31.1 CATEGORIES OF FINANCIAL INSTRUMENTS
2019 2019 Fair value Fair value through other TOTAL Assets through profit comprehensive Finance lease FINANCIAL Non-financial held for TOTAL and loss income (OCI)* Amortised cost receivables ASSETS assets sale AMOUNT Notes Rm Rm Rm Rm Rm Rm Rm Rm ASSETS Finance lease receivables 14 157 157 – (155) 2 Long-term financial assets 15 64 613 677 33 710 Trade and other receivables 18 4 45 6 321 142 6 512 1 644 (772) 7 384 Cash and cash equivalents 19 7 303 7 303 (77) 7 226 Total assets 68 45 14 237 299 14 649 1 677 (1 004) 15 322
2019 2019 Fair value Fair value through other Liabilities through profit comprehensive TOTAL FINANCIAL Non-financial held TOTAL and loss income (OCI)* Amortised cost LIABILITIES liabilities for sale AMOUNT Notes Rm Rm Rm Rm Rm Rm Rm LIABILITIES Interest-bearing non-current liabilities 22 4 621 4 621 – – 4 621 Other non-current liabilities 24 146 146 2 111 2 257 Trade and other payables 25 37 1 8 792 8 830 1 471 (938) 9 363 Amounts due to bankers and short-term loans 26 15 3 732 3 747 1 (561) 3 187 Total liabilities 37 16 17 291 17 344 3 583 (1 499) 19 428
* This relates to forward exchange contracts that are part of a cash flow hedging relationship.
84 85 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
31 FINANCIAL INSTRUMENTS continued
2018 2018 Fair value through profit and loss: Derivatives Designated Available- designated TOTAL Assets at initial Held to for-sale Loans and as hedging Finance lease FINANCIAL Non-financial held for TOTAL recognition maturity financial assets receivables instruments receivables ASSETS assets sale AMOUNT Notes Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm ASSETS Finance lease receivables 14 – – – – – 211 211 – 211 Long-term financial assets 15 55 755 5 61 – 20 896 10 – 909 Trade and other receivables 18 – 155 – 8 005 1 248 8 408 643 (168) 8 883 Cash and cash equivalents 19 – – – 7 912 – – 7 912 (19) 7 893 Total assets 55 910 5 15 977 1 479 17 427 653 (187) 17 897
2018 2018 Fair value through profit and loss: Derivatives Designated designated Assets at initial Measured at as hedging TOTAL FINANCIAL Non-financial held for TOTAL recognition amortised cost instruments ASSETS liabilities sale AMOUNT Notes Rm Rm Rm Rm Rm Rm Rm LIABILITIES Interest-bearing non-current liabilities 22 – 5 995 – 5 995 – – 5 995 Other non-current liabilities 24 – 490 – 490 1 753 – 2 243 Trade and other payables 25 9 9 444 – 9 453 1 794 (125) 11 122 Amounts due to bankers and short-term loans 26 – 5 140 35 5 175 – (1) 5 174 Total liabilities 9 21 069 35 21 113 3 537 (126) 24 534
All financial instruments are carried at fair value or amounts that approximate fair value, except for the non-current portion of fixed rate receivables, payables and interest-bearing borrowings, which are carried at amortised cost. The carrying amounts for investments, cash and cash equivalents as well as the current portion of receivables, payables and interest-bearing borrowings approximate fair value due to the short-term nature of these instruments. The fair values have been determined using available market information and discounted cash flows.
For all of the above mentioned categories the carrying value approximates the fair value with the exception of non-current interest-bearing liabilities where the fair value as at 30 September 2019 has been calculated as R33 million (2018: R71 million). 2018 2018 Fair value through profit and loss: Derivatives Designated Available- designated TOTAL Assets at initial Held to for-sale Loans and as hedging Finance lease FINANCIAL Non-financial held for TOTAL recognition maturity financial assets receivables instruments receivables ASSETS assets sale AMOUNT Notes Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm ASSETS Finance lease receivables 14 – – – – – 211 211 – 211 Long-term financial assets 15 55 755 5 61 – 20 896 10 – 909 Trade and other receivables 18 – 155 – 8 005 1 248 8 408 643 (168) 8 883 Cash and cash equivalents 19 – – – 7 912 – – 7 912 (19) 7 893 Total assets 55 910 5 15 977 1 479 17 427 653 (187) 17 897
2018 2018 Fair value through profit and loss: Derivatives Designated designated Assets at initial Measured at as hedging TOTAL FINANCIAL Non-financial held for TOTAL recognition amortised cost instruments ASSETS liabilities sale AMOUNT Notes Rm Rm Rm Rm Rm Rm Rm LIABILITIES Interest-bearing non-current liabilities 22 – 5 995 – 5 995 – – 5 995 Other non-current liabilities 24 – 490 – 490 1 753 – 2 243 Trade and other payables 25 9 9 444 – 9 453 1 794 (125) 11 122 Amounts due to bankers and short-term loans 26 – 5 140 35 5 175 – (1) 5 174 Total liabilities 9 21 069 35 21 113 3 537 (126) 24 534
All financial instruments are carried at fair value or amounts that approximate fair value, except for the non-current portion of fixed rate receivables, payables and interest-bearing borrowings, which are carried at amortised cost. The carrying amounts for investments, cash and cash equivalents as well as the current portion of receivables, payables and interest-bearing borrowings approximate fair value due to the short-term nature of these instruments. The fair values have been determined using available market information and discounted cash flows.
For all of the above mentioned categories the carrying value approximates the fair value with the exception of non-current interest-bearing liabilities where the fair value as at 30 September 2019 has been calculated as R33 million (2018: R71 million).
86 87 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
31 FINANCIAL INSTRUMENTS continued
31.2 FAIR VALUE MEASUREMENTS RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
–– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets. The markets from which these quoted prices are obtained are the bonds market, the stock exchange as well other similar markets. –– Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The valuation techniques used in deriving level 2 fair values are discounted cash flows. The discounted cash flows are derived using rates that appropriately reflects the different risks of the various counterparties in relation to the financial instrument. Significant unobservable inputs are long-term revenue and profit projections as well as management's experience and knowledge of the market conditions. Inputs used and assumptions made in relation to the discounted cash flow model are based on macro-economic indicators consistent with external sources of information. –– Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The valuation techniques used in deriving level 3 fair values are discounted cash flows as well as the net asset value approach of the investment that is being valued. This information is based on unobservable market data, and adjusted for based on management's experience and knowledge of the investment. 2019 Level 1 Level 2 Level 3 Total Rm Rm Rm Rm Financial assets at fair value through profit or loss Long-term financial assets 64 64 Trade and other receivables 4 4 Financial assets at FVOCI Trade and other receivables 45 45 Total – 49 64 113 Financial liabilities at fair value through profit or loss Trade and other payables 37 37 Financial liabilities at FVOCI Trade and other payables 1 1 Amounts due to bankers and short-term loans 15 15 Total – 53 53 2018 Level 1 Level 2 Level 3 Total Rm Rm Rm Rm Financial assets at fair value through profit or loss Long-term financial assets 55 55 Available-for-sale financial assets Shares 5 5 Derivative assets designated as effective hedging instruments 1 1 Total 1 60 61 Financial liabilities at fair value through profit or loss Financial liabilities designated at fair value through profit or loss 9 9 Derivatives 35 35 Total 44 44
Reconciliation of Level 3 Fair Value Measurements Available- Fair value of for-sale investment in unlisted shares cell captives Rm Rm Balance 30 September 2017 5 49 Total gains recognised in profit and loss – 6 Balance 30 September 2018 5 55
Fair Value through profit and loss: Investment in Unlisted shares cell captives Rm Rm Balance as at 1 October 2018 5 55 Total gains recognised in profit and loss – 4 Balance 30 September 2019 5 59
Total gains recognised in profit and loss relates to unrealised gains relating to financial assets that are measured at fair value at the end of the period.
88 89 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
31 FINANCIAL INSTRUMENTS continued
31.3 FINANCIAL RISK MANAGEMENT
a. Capital risk management
The group manages its capital to ensure that all entities in the group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of debt and equity. The overall strategy remains unchanged from the previous year.
The capital structure of the group consists of debt (refer notes 22 and 26), cash and cash equivalents (note 19) and equity attributable to equity holders of Barloworld Limited, comprising issued capital (note 21), reserves and retained earnings (statement of changes in equity).
A finance committee consisting of senior executives of the group meets on a regular basis to review the capital structure based on the cost of capital and the risks associated with each class of capital, to analyse currency and interest rate exposure and to re-evaluate treasury management strategies in the context of most recent economic conditions and forecasts. The group has targeted gearing ratios for each major business segment. The group's various treasury operations provide the group with access to local money markets and provide group subsidiaries with the benefit of bulk financing and depositing.
b. Market risk
i) Currency risk
Trade commitments
Currency risk arises because the group enters into financial transactions denominated in a currency other than the functional currency of the group. The group's currency exposure management policy for the southern African operations is to hedge substantially all material foreign currency trade commitments in which customers have or will not be accepting the currency risk. In respect of offshore operations, where there is a traditionally stable relationship between the functional and transacting currencies, the need to take foreign exchange cover is at the discretion of the divisional board. Each division manages its own trade exposure within the overall framework of the group policy. In this regard the group has entered into certain forward exchange contracts which do not relate to specific items appearing in the statement of financial position, but were entered into to cover foreign commitments not yet due or proceeds not yet received. The risk of having to close out these contracts is considered to be low.
Net currency exposure and sensitivity analysis
The following table represents the extent to which the group has monetary assets and liabilities in currencies other than the group companies' functional currency. The information is shown inclusive of the impact of forward contracts and options in place to hedge the foreign currency exposures. There has been no change to the group's exposure to market risks or the manner in which these risks are managed and measured. Based on the net exposure below it is estimated that a simultaneous 10% change in all foreign currency exchange rates against divisional functional currency will impact the fair value of the net monetary assets/liabilities of the group to the extent of R288 million (2018: R373 million), of which R26 million (2018: R17 million) will impact other comprehensive income and R262 million (2018: R356 million) will impact profit or loss. 31 FINANCIAL INSTRUMENTS continued
31.3 FINANCIAL RISK MANAGEMENT continued
CURRENCY OF ASSETS/(LIABILITIES) British Net foreign currency SA Rand Euro Sterling US Dollar Total monetary assets/(liabilities) Million Million Million Million Million Functional currency of group operation: SA Rand n/a 29 (49) (1 647) (1 667) Euro – British Sterling 8 136 n/a 4 493 4 637 US Dollar (94) 104 (9) n/a 1 Other currencies (62) – – (32) (94) As at 30 September 2019 (148) 269 (58) 2 814 2 877 SA Rand n/a 1 (4) 268 265 Euro – n/a – – – British Sterling (58) – n/a 3 287 3 228 US Dollar (103) 3 (16) n/a (116) Other currencies (59) (1) – 412 352 As at 30 September 2018 (220) 3 (20) 3 966 3 730
Fair value 2019 2018 Rm Rm Hedge accounting applied in respect of foreign currency risk Cash flow hedges – fair value of asset/(liability) – foreign currency forward exchange contracts 30 (34)
The foreign currency contracts have been acquired to hedge the underlying currency risk arising from a firm commitment to acquire equipment machines as well as the forecast purchases of spare parts. All cash flows are expected to occur and affect profit or loss within the next 12 months.
ii) Interest rate risk
Interest rate risk arises when the absolute level of interest rates on the group's interest-bearing borrowings are subject to fluctuations. The group manages the exposure to interest rate risk by maintaining a balance between fixed and floating rate borrowings. The interest rate characteristics of new borrowings and the refinancing of existing borrowings are structured according to expected movements in interest rates. There has been no change in the current year to this approach.
90 91 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
31 FINANCIAL INSTRUMENTS continued
31.3 FINANCIAL RISK MANAGEMENT continued
The interest rate profile of total borrowings is as follows: Year of redemption/ Interest 2019 2018 Currency repayment rate (%) Rm Rm Liabilities in foreign currencies Bank overdrafts and short term loans USD Libor* + 3.5% 804 806 ZMK (12%) +8.3%** – 12 Prime (MT) – 2% & MZM 3% p.a 119 83 1 Month Mosprime RUR + 2.85% – 100 UK Base rate + 2% EUR & 3% – 2 BWP Prime – 1.5% 42 155 Total short-term foreign currency liabilities (note 26) 965 1 158 Unsecured loans BWP 2019 Prime – 1.5% – 255 USD 2020 4% 233 – Euribor*** 12m + Liabilities under capitalised finance leases EUR 2019 5.68% – 96 Total long-term foreign currency liabilities (note 22) 233 351 Liabilities in South African Rand Bank borrowings and bank overdrafts 2 222 4 016 Total South African Rand liabilities (note 26) 2 222 4 016 2019 to 2024 Secured loans onwards 9 – 12.6 – 102 Unsecured loans 2019 – 2024 7.4 – 9.07 6 180 7 137 2019 to 2024 Liabilities under capitalised finance leases onwards 9 – 15.1 341 528 Total South African Rand liabilities (note 22) 6 521 7 767 Total South African Rand and foreign currency liabilities (note 22 & 26) 9 941 13 292 Interest rates Loans at fixed rates of interest 1 477 3 605 Loans linked to floating rates of interest 5 044 4 258 Loans linked to offshore money markets 233 255 Long term interest rate exposure (note 22) 6 754 8 118 Loans at fixed rates of interest 460 Loans linked to floating rates of interest 2 222 3 556 Loans linked to offshore money markets 965 1 158 Short term interest rate exposure (note 26) 3 187 5 174 Interest rate exposure (note 22 & 26) 9 941 13 292
* Libor – London inter-bank offered rate ** Mozambique short-term bank instrument *** Euribor – European inter-bank offered rate 31 FINANCIAL INSTRUMENTS continued
31.3 FINANCIAL RISK MANAGEMENT continued
2019 2018 Rm Rm Interest rate sensitivity analysis Impact of a 1% increase in South African interest rates – charge to profit or loss, 87 118 Impact of a 1% increase in offshore interest rates – charge to profit or loss 12 15 iii) Other price risk The group is exposed to price risk arising out of the following: Barloworld share price The group has a liability to option holders in terms of the long-term share-based payments (refer note 32.2 and 32.3) Barloworld share price sensitivity analysis Impact of a 10% increase in the Barloworld share price as at 30 September – charge to profit or loss in respect of the liability 4 3 – fair value of designated cash flow hedge – Barloworld share call options
The call options have expired and no new options have been acquired to hedge against future price risk.
There has been no change during the current year in the group approach to managing other price risk.
c. Credit risk
Credit risk arises from the risk that a counterparty may default or not meet its obligations timeously as contracted. Credit risk is managed on a Group-wide basis. Potential areas of credit risk relate primarily to trade receivables and cash on deposit. Trade receivables consist mainly of a large and widespread customer base. Where considered appropriate, use is made of credit guarantee insurance. The granting of credit is controlled by a thorough application process based on factors specific and unique to each operating division which includes creditworthiness checks using the reputable ITC institutions, the credit quality of the customer, its financial position, upfront deposits received etc. Group companies monitor the financial position of their customers on an ongoing basis. It is group policy to deposit cash with major banks and financial institutions with strong credit ratings.
The carrying amount of the financial assets represents the group's maximum exposure to credit risk without taking into consideration any collateral provided as presented in note 31.1.
The following table details the risk profile of trade receivables based on the group's provision matrix. As the group's historical credit loss experience shows significantly different loss patterns for the different customer segments, the provision for loss allowance is further distinguished between the group's different operations.
92 93 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
31 FINANCIAL INSTRUMENTS continued
31.3 FINANCIAL RISK MANAGEMENT continued
2019 Average ECL/ Impairment Gross carrying ratio amount Lifetime ECL (%) Rm Rm Rm Equipment Fully performing 2 165 (27) 1 Up to 90 days past due 1 285 (96) 7 91 days to 180 days past due 166 (75) 45 181 days to 270 days past due 179 (57) 32 greater than 271 days past due 68 (51) 75 Automotive Fully performing 978 (17) 2 Up to 90 days past due 348 (47) 14 91 days to 180 days past due 60 (31) 52 181 days to 270 days past due 52 (30) 58 greater than 271 days past due 439 (333) 76 Logistics Fully performing 758 (3) 0 Up to 90 days past due 133 (2) 2 91 days to 180 days past due 37 (6) 16 181 days to 270 days past due 8 (5) 62 greater than 271 days past due 21 (18) 82 Corporate 12 – Total group 6 709 (798)
d. Liquidity risk
Liquidity risk arises when the group cannot meet its contractual cash outflows as they fall due and payable. The group manages liquidity risk by monitoring forecast cash flows, maintaining a balance between long-term and short-term debt and ensuring that adequate unutilised borrowing facilities are maintained. Unutilised bank facilities amounted to R10.5 billion (2018: R10.5 billion). There has been no change to this approach during the current year. 31 FINANCIAL INSTRUMENTS continued
31.3 FINANCIAL RISK MANAGEMENT continued
Maturity profile of financial liabilities
The maturity profile of the financial instruments is summarised as follows (based on contractual undiscounted cash flows): Repayable during the year ending 30 September 2019 Total 2021 to owing 2020 2023 Rm Rm Rm Interest-bearing liabilities 9 118 2 625 6 493 Trade payables and other non-interest-bearing liabilities 8 830 8 830 FEC's 53 53
Repayable during the year ending 30 September 2018 Total 2020 to owing 2019 2022 Rm Rm Rm Interest-bearing liabilities 9 722 3 270 6 451 Trade payables and other non-interest-bearing liabilities 11 172 11 122 50
2019 2018 Rm Rm 32 SHARE INCENTIVE SCHEMES AND SHARE-BASED PAYMENTS 32.1 FINANCIAL EFFECT OF SHARE-BASED PAYMENT TRANSACTIONS Income statement effect Compensation expense arising from equity and cash-settled forfeitable share plan 74 68 Compensation expense arising from equity and cash-settled share appreciation rights incentive plan 6 7 Share-based payment expense included in operating profit 80 75 Taxation benefit on forfeitable share plan and share appreciation rights (22) (21) Net share-based payment expense after taxation 58 54 Financial position effect Liability raised for cash-settled shares (to be incurred within one to five years) (42) (30) Deferred taxation asset raised on share-based payment transactions 15 6 Net reduction in shareholders' interest as a result of share-based payment transactions (27) (24)
94 95 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
32 SHARE INCENTIVE SCHEMES AND SHARE-BASED PAYMENTS continued
32.2 FORFEITABLE SHARE PLAN
On 28 January 2010 the group introduced the Barloworld Forfeitable share plan (FSP).
The scheme allows executive directors and certain senior employees to earn a long-term incentive to assist with the retention and reward of selected employees.
Shares are granted to employees for no consideration. These shares participate in dividends and shareholder rights from grant date.
The vesting of the shares is subject to continued employment for a period of three years or the employee will forfeit the shares.
Prior to the 2016 awards, shares issued to the executive directors were subject to performance conditions. From 30 March 2016 shares issued to the executive directors and certain senior employees are subject to performance conditions which will be measured over the three-year vesting period.
The performance conditions over the vesting period include a market condition based on total shareholder return and non-market conditions based on return on net operating assets and headline earnings per share.
On resignation, the employee will forfeit any unvested shares. On death or retirement only a portion of the shares will vest, calculated based on the number of days worked over the total vesting period, subject to any performance condition being met.
The scheme is settled in shares and therefore the scheme is equity-settled. In jurisdictions where the delivery of shares is impractical, cash will be paid to employees in lieu of shares. These shares are cash-settled share-based payments.
Fair value estimates
Equity-settled
In terms of IFRS 2, the transaction is measured at fair value of the equity instruments at the grant date. The fair value takes into account that the employees are entitled to the dividends from grant date. The fair value of the equity-settled shares subject to non-market conditions is the closing share price at grant date. The estimated fair value of the equity-settled shares subject to market conditions were calculated at grant date using a Monte Carlo simulation model with the following inputs:
27 February 29 March Date of grant: 2019 2017 Non-market conditions Number of shares granted 726 149 653 703 Share price at grant date (R) 131.12 120.00 Estimated fair value per share at grant date (R) 131.12 120.00 Market conditions Number of shares granted 135 261 69 862 Share price at grant date (R) 131.12 120.00 Expected volatility (%) 29.0 – 34.0 30.0 Expected dividend yield (%) 3.5 3.00 Risk free rate (%) 7.4 7.6 Estimated fair value per share at grant date (R) 96.32 100.46
Cash-settled
In terms of IFRS 2, liabilities relating to cash-settled share-based payments are adjusted to fair value at financial position date. The estimated fair value of the cash-settled shares was calculated by using the closing share price at the reporting date, risk free rate at reporting date and discounting future expected dividends. 32 SHARE INCENTIVE SCHEMES AND SHARE-BASED PAYMENTS continued
32.2 FORFEITABLE SHARE PLAN continued
27 February 30 January Date of grant: 2019 2018* 29 March 2017 Number of cash-settled shares granted 65 250 608 280 97 800 Share price at grant date (R) 131.12 171.30 120.00 Risk free rate (%) 7.000 6.6 6.4 Estimated fair value per cash-settled share at grant date (R) 127.83 168.65 116.82 Estimated fair value per cash-settled share at year end (R) 114.89 117.96 125.66
* In 2018 the group issued cash settled schemes as a result of the closed period that was in place at the time of the grants.
32.3 SHARE APPRECIATION RIGHTS SCHEME
During 2007 the group introduced the Barloworld Cash Settled Share Appreciation Right Scheme.
The scheme allows executive directors and certain senior employees to earn a long-term incentive amount calculated based on the increase in the Barloworld Limited share price between the grant date and the vesting and exercise of such rights. During 2011, the scheme rules were amended to change all future awards to be equity-settled in shares.
The objective of the scheme is to recognise the contributions of senior staff to the group's financial position and performance and to retain key employees.
The vesting of the rights are subject to specific performance conditions, based on group headline earnings per share. Rights are granted for a period of six years and vest one-third after three years from grant date, a further one-third after four years and the final third after five years.
The grant price of these appreciation rights equals the volume weighted average market price of the underlying shares on the three trading days immediately preceding grant date.
On resignation, share appreciation rights which have not yet vested and those vested but not exercised, are forfeited. On death or retirement the Barloworld remuneration committee may permit a portion of unvested rights to be exercised within one year (or such extended period as the committee may decide) of the date of cessation of employment.
It is group policy that employees should not deal in Barloworld Limited shares (and this is extended to the forfeitable share plan, share appreciation rights and share options schemes) for the periods from 1 April for half year end and 1 October for year end until 24 hours after publication of the results and at any other time during which they have access to price sensitive information.
Equity-settled share appreciation rights: Fair value estimates
In terms of IFRS 2, the transaction is measured at fair value of the equity instruments at the grant date.
The estimated fair value of the share appreciation rights was calculated using a binomial pricing model, with inputs as set out below. Equity-settled 27 February Date of grant 2019 29 March 2017 30 March 2016 30 March 2015 18 March 2014 Number of share appreciation rights granted 541 920 150 300 330 240 3 026 700 2 264 560 Grant price (R) 130.02 121.53 72.77 90.77 106.82 Share price at grant date (R) 131.12 120.00 77.80 90.50 107.32 Expected volatility (%) 24.6 30 28.7 28.7 35.1 Expected dividend yield (%) 3.5 2.9 4.4 3.5 2.7
96 97 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
32 SHARE INCENTIVE SCHEMES AND SHARE-BASED PAYMENTS continued
32.3 SHARE APPRECIATION RIGHTS SCHEME continued
Equity-settled 27 February Date of grant 2019 29 March 2017 30 March 2016 30 March 2015 18 March 2014 Risk free rate (%) 8.2 7.9 8.6 7.4 8.1 Exercise multiple (share price at exercise date/option exercise price) 1.8 1.8 1.9 1.9 1.9 Estimated fair value per share appreciation right at grant date (R) 45.16 38.89 24.06 26.59 39.71
The volatility was based on historical volatility of the shares over a five-year period. It was assumed that, given the long time frame, historical volatility could be used to estimate expected or implied volatility.
Cash-settled share appreciation rights: Fair value estimates
In terms of IFRS 2, liabilities relating to cash-settled share-based payments are adjusted to fair value at financial position date.
The estimated fair value of the share appreciation rights was calculated using a binomial pricing model, with inputs as set out below. Cash-settled 30 January Date of grant 2018 Number of share appreciation rights granted 347 540 Grant price (R) 177.71 Share price at grant date (R) 171.30 Expected volatility (%) 34.3 Expected dividend yield (%) 4.2 Risk free rate (%) 8 Exercise multiple (share price at exercise date/option exercise price) 1.8 Estimated fair value per share appreciation right at grant date (R) 50.41 Estimated fair value per cash-settled share at year end (R) 17.21 32 SHARE INCENTIVE SCHEMES AND SHARE-BASED PAYMENTS continued
32.4 TOTAL FORFEITABLE SHARES AND APPRECIATION RIGHTS UNEXERCISED
The following forfeitable shares and share appreciation rights granted are unexercised: Number of options/rights Contractual Date from life Original which remaining exercise Barloworld Barloworld Total Date of grant exercisable Expiry date (years) price (R) directors employees# unexercised* 30 Mar 2016 29 Mar 2019 29 Mar 2022 2.5 72.77 120 380 149 660 270 040 29 Mar 2017 29 Mar 2020 29 Mar 2023 3.5 121.53 85 920 29 950 115 870 27 Feb 2019 27 Feb 2022 27 Feb 2025 5.4 130.02 189 340 352 580 541 920 Total equity-settled share appreciation rights granted and unexercised 395 640 532 190 927 830 30 Jan 2018 30 Jan 2021 30 Jan 2024 4.3 137 540 154 730 292 270 Total cash-settled share appreciation rights granted and unexercised 137 540 154 730 292 270 29 Mar 2017 29 Mar 2020 29 Mar 2020 0.5 59 440 514 546 573 986 27 Feb 2019 27 Feb 2022 27 Feb 2022 2.4 31 510 784 560 816 070 Total equity-settled forfeitable shares granted and unexercised 90 950 1 299 106 1 390 056 29 Mar 2017 29 Mar 2020 29 Mar 2020 0.5 – 51 980 51 980 30 Jan 2018 30 Jan 2021 30 Jan 2021 1.3 21 910 520 498 542 408 27 Feb 2019 27 Feb 2022 27 Feb 2022 2.4 – 65 250 65 250 Total cash-settled forfeitable shares granted and unexercised 21 910 637 728 659 638 Total unexercised 646 040 2 623 754 3 269 794
The weighted average share price at the date of exercising share appreciation rights during the period was R120.26 (2018: R132.74)
* Scheme rules dictate that the number of unexercised options may not exceed 10% of the total number of issued shares of the company at any time. # The unexercised share options granted to retired directors and employees are included in this column.
98 99 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
32 SHARE INCENTIVE SCHEMES AND SHARE-BASED PAYMENTS continued
32.4 TOTAL FORFEITABLE SHARES AND APPRECIATION RIGHTS UNEXERCISED continued
Weighted Number of Number of average Share options and appreciation rights movement for forfeitable appreciation exercise price the year shares rights (R)* 2019 Unexercised at the beginning of the year 2 300 147 1 466 348 73.24 Rights granted in terms of equity-settled share appreciation rights scheme 541 920 130.02 Forfeitable shares granted 926 660 Forfeitable shares forfeited (195 295) Forfeitable shares vested (981 818) Appreciation rights equity forfeited (69 454) 98.21 Appreciation rights cash forfeited (55 270) Appreciation rights exercised (663 444) 89.92 Forfeitable shares, options and appreciation rights unexercised at year-end 2 049 694 1 220 100 112.3 Appreciation rights exercisable at year-end 79 980 72.77 Held by: Directors, employees and ex-employees of Barloworld 2 049 694 1 220 100 112.3 2018 Unexercised at the beginning of the year 2 136 661 4 922 514 87.44 Rights granted in terms of cash-settled share appreciation rights scheme 347 540 177.71 Forfeitable shares granted 608 280 Forfeitable shares forfeited (174 882) Forfeitable shares vested (269 912) Appreciation rights forfeited (2 613 590) 90.83 Appreciation rights exercised (1 190 116) 93.34 Forfeitable shares, options and appreciation rights unexercised at year-end 2 300 147 1 466 348 73.24 Appreciation rights exercisable at year-end (638 268) 90.73 Held by: Directors, employees and ex-employees of Barloworld 2 300 147 1 466 348 73.24
* Weighted average exercise price for appreciation rights.
Rm Rm 2 – 5 years <1 year 2019 2018 Estimated amount to be paid over to tax authorities on behalf of employees 44 33 77 102
The estimated withholding tax obligation associated with equity-settled scheme to be paid over to the tax authorities on behalf of the employees in future years is based on a number of grants that are expected to vest at maturity and the share price as at 30 September 2019 at the applicable tax rate. 33 CHANGES IN ACCOUNTING POLICIES
Standards that have become applicable to the Group for the first time for the 2019 financial year include: IFRS 9 Financial Instruments (IFRS 9); and IFRS 15 Revenue from Contracts with Customers (IFRS 15). 33.1 IFRS 9 FINANCIAL INSTRUMENTS
The adoption of IFRS 9 had the following impact on the group:
33.1.1 Change in classification for the measurement categories for financial instruments.
33.1.2 Change from the incurred loss model to the expected credit loss (ECL) model to determine impairment of financial assets.
33.1.1 CLASSIFICATION, INITIAL MEASUREMENT AND SUBSEQUENT MEASUREMENT
The table and the accompanying notes that follow explain the previous and new classification measurement categories for each class of the Group’s financial instruments as at 1 October 2018.
Financial assets
Please note that unless otherwise stated the carrying amounts under the new measurement categories remains the same as the previous categories
Financial instrument Original category under IAS 39 New category under IFRS 9 Long-term financial assets Fair value through profit and loss: Irrevocably designated as at fair value note a (Investments in equity instruments) through other comprehensive income Designated at initial recognition Available for sale financial assets Cost Long-term financial assets (Debt Held to maturity Measured at amortised cost note b instruments) Long-term financial assets Loans and receivables Measured at amortised cost note b (Long-term receivables) Long-term financial assets Available for sale Measured at fair value through profit (Investment securities) and loss Trade and other receivables Derivatives designated as hedging Derivatives in the Equipment business (Derivatives) instruments are measured at fair value through profit and loss Trade and other receivables Fair value (Cash flow hedge) Measured at fair value through other note b (derivatives) comprehensive income Trade and other receivables (Debt Held to maturity Measured at amortised cost note b instruments) Trade and other receivables (Other Loans and receivables Measured at amortised cost note b receivables) Cash and cash equivalents Loans and receivables Measured at amortised cost note b
100 101 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
33 CHANGES IN ACCOUNTING POLICIES continued Financial liabilities Interest-bearing non-current liabilities Measured at amortised cost Measured at amortised cost note b Other non-current liabilities (Deferred note b income) Measured at amortised cost Measured at amortised cost Other non-current liabilities (Other note b payables) Measured at amortised cost Measured at amortised cost Trade and other payables Fair value through profit and loss: Measured at fair value through profit (Derivatives) Designated at initial recognition and loss Trade and other payables Fair value Measured at fair value through other (Derivatives) (Cash flow hedge) comprehensive income Trade and other payables Measured at amortised cost Measured at amortised cost note b Derivatives in the Equipment business Amounts due to bankers and short- Derivatives designated as hedging are measured at fair value through term loans (Derivatives) instruments profit and loss Amounts due to bankers and short- Fair value Measured at fair value through other note b term loans (derivatives) (Cash flow hedge) comprehensive income Amounts due to bankers and short- note b term loans Measured at amortised cost Measured at amortised cost
Note a:
The group has a number of small equity investments that were previously recognised at cost (allowable under IAS 39) but which are now recognised at the best estimate of fair value. There has been no material change in the value of these equity investments under IFRS 9.
Note b:
The classification of financial instruments as measured at amortised cost is deemed appropriate as the contractual cash flows for the group consist solely of principal and interest. Barloworld’s business model is to only collect the principal amount outstanding and interest charged on the principal debt.
33.1.2 IMPAIRMENT
Before the adoption of IFRS 9 the group calculated the allowance for credit losses using the incurred loss model. Under the incurred loss model, the group assessed whether there was any objective evidence of impairment at the end of each reporting period. If such evidence existed the allowance for credit losses in respect of financial assets at amortised cost was calculated as the difference between the asset’s carrying amount and its recoverable amount, being its present value of the estimated future cash flows discounted at the original effective interest rate.
Under IFRS 9 the group determines the allowance for credit losses based on the expected credit loss (ECL) model to assess whether financial assets measured at amortised cost, finance lease receivables and contract assets collectively referred to as receivables are impaired.
Please refer to note 19 for the policy on impairment of financial assets.
Refer to note 31 Financial risk management for more detail on the application of the provision matrix and the simplified parameter-based approach.
The following table summarises the impact, net of tax, of transition to IFRS 9 on the opening balance of reserves and retained earnings as at 1 October 2018. 33 CHANGES IN ACCOUNTING POLICIES continued
Rm Impact of adopting IFRS 9 at 1 October 2018 (impairment) Recognition of expected credit losses under IFRS 9 17 Related tax (3) Increase in retained earnings* 14
* This represents a decrease in the impairment loss recognised under IAS 39, thus an error that led to the overstatement of impairment losses in terms of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, which is not restated but corrected through retained earnings as it is considered immaterial.
33.1.3 TRANSITION
The Group has adopted IFRS 9 using the modified retrospective transition approach at the date of initial application (i.e. 1 October 2018). Accordingly, information relating to 30 September 2018 does not reflect the requirements of IFRS 9 but rather those of IAS 39 and the information presented for 2018 has not been restated. The adoption of IFRS 9 has not resulted in a significant impact on the Group.
The following elections have been made on the basis of the facts and circumstances that existed at the date of initial application:
33.1.3.1 Recognition of fair value movements in equity investments in other comprehensive income
The fair value of equity investments is inherently volatile and Barloworld’s business model is not that of an equity investment holding company. Therefore, the fair value movements in equity instruments are not considered part of the everyday operations of the group as presented in the income statement. Barloworld therefore elected to recognise equity instruments at Fair Value through Other Comprehensive Income (FVTOCI).
33.1.3.2 Hedge accounting
The group currently applies cash flow hedge accounting in its Equipment Southern Africa division on certain of its firm commitments for Caterpillar equipment. Currently Barloworld hedges the currency risk inherent in these Caterpillar equipment (hedged item) with forward exchange contracts (hedging instrument).
Barloworld has elected to continue applying the hedge accounting requirements of IAS 39.
33.1.3.3 Impairment of financial assets
The group has elected to apply the simplified approach for finance lease receivables.
102 103 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
33 CHANGES IN ACCOUNTING POLICIES continued
33.2 IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
The group has adopted IFRS 15 using the modified retrospective transition approach at the date of initial application (i.e. 1 October 2018). Accordingly, the information presented for 2018 has not been restated. The adoption of IFRS 15 has resulted in revenue being disaggregated and disclosed by nature as opposed to type of revenue under IAS 18 Revenue. The adoption of IFRS 15 has resulted in an increase in opening retained income of R6 million, which arose as a result of aligning the accounting policies relating to work in progress across our equipment businesses. Whilst this is an error relating to the 2018 financial year it was not considered material to warrant a restatement of the prior year financial statements.
33.2.1 REVENUE
The Group has determined that the disaggregation of revenue using existing operating segments is appropriate as the timing of the transfer of goods or services (at a point in time vs over time) does not change with the adoption of IFRS 15. Refer to accounting policy note 6 for further details with regards to recognition and measurement as well as note 2 to financial statements for quantification of Revenue from contracts with customers.
ADDITIONAL DISCLOSURES TO THE CONDENSED UNAUDITED INTERIM FINANCIAL STATEMENTS WITH RESPECT TO 33.2.2 THE REVENUE FROM CONTRACTS WITH CUSTOMERS
In the condensed unaudited interim financial statements for the six months ended 31 March 2019, revenue was disclosed in terms of sale of goods and rendering of services. In the consolidated audited annual financial statements, further disaggregation in terms of the requirements of IFRS 15 has been provided. In order to align the disclosure between the interim and annual financial statements the following additional disclosures are provided for 31 March 2019. Unaudited September March 2019 2019 Rm Rm REVENUE Revenue by nature Sale of goods 40 666 20 195 Equipment (new and used) 11 565 5 806 Vehicles (new and used) 17 951 8 926 Parts (new and used) 11 150 5 463 Rendering of services 16 168 8 531 Parts 721 400 Service 5 344 2 668 - Workshop and in-field service 3 944 2 015 - Aftersales 263 142 - Fitment and repairs 1 137 511 Rental 3 988 2 106 Commissions 875 440 Freight forwarding 265 141 Supply chain support solutions 2 229 1 418 Transportation 2 746 1 358 Total continuing operations 56 834 28 726 33 CHANGES IN ACCOUNTING POLICIES continued
Unaudited September March 2019 2019 Rm Rm Discontinued operations (Note 20) Avis Fleet 3 372 1 643 Total discontinued operations 3 372 1 643 Total group 60 206 30 369
33.2.3 CONTRACT ASSETS
Under IAS 18 Revenue, the group accounted for the receivables relating to open and ongoing maintenance and repair jobs within the Equipment businesses within trade receivables (note 18). Under IFRS 15, however, this is recognised as a contract asset as it relates to work performed under contractual obligation but certain performance obligations are still outstanding and, as at the end of the reporting period, customers have not been invoiced. In terms of the transaction price, the costs incurred to date plus a profit margin, is deemed to be the most accurate method of estimating costs to be recovered once maintenance/repair jobs are finalised after 30 September 2019 and to be included in Trade Receivables when the customer has been invoiced. The contract asset is presented separately from trade and other receivables on the face of the statement of financial position.
For further detail with regards to contract asset disclosed as at 30 September 2019 please refer to accounting policy note 6 of the financial statements.
33.2.4 CONTRACT LIABILITIES
Furthermore prior to IFRS 15 adoption, Deferred Revenue under maintenance and repair contracts was included as a provision (refer to note 23). However, with the adoption of IFRS 15 deferred revenue will now change to a contract liability and is presented separately on the statement of financial position.
For further detail with regards to liabilities disclosed as at 30 September 2019 please refer to judgements in note 3 of the accounting policies.
New Standards and interpretations not yet adopted
IFRS 16 ‘Leases' (Effective for the group from 1 October 2019)
The group will adopt IFRS 16 Leases, effective for financial years beginning on or after on 1 January 2019, on 1 October 2019. IFRS 16 requires all leases to be capitalised with the exception of short-term leases or leases of low value assets and the definition of a lease has been changed to include control, which distinguishes leases from service contract on the basis of whether the the use of an identified asset is controlled by the customer (lessee). The lessor accounting has largely remained the same. The adoption will result in the Group recognising a lease liability which represents its obligation to make lease payments in future, and a corresponding right of use asset representing its right to use the specifically identified/implied leased asset.
The group has elected to adopt IFRS 16 using the modified retrospective approach. Under this approach the group will apply IFRS 16 from 1 October 2019 without restating comparative information with any resulting adjustments recognised in opening retained earnings. The group has applied the following practical expedients:
–– A low value assets threshold of R85 000 has been determined and therefore, the Group will not apply IFRS 16 to leases with a value of less than R85 000, on a present value basis; and –– to leases with terms shorter than 12 months.
104 105 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
33 CHANGES IN ACCOUNTING POLICIES continued The adoption of the standard will have a material effect on the group’s financial statements by significantly increasing the Group’s assets and liabilities.
Based on the group’s current assessment, the impact is illustrated below:
On transition 1 October 2019 Estimated range R'b Right of use asset 2.1 2.2 Lease liability (Debt) (2.6) (2.7) Equity 0.5 0.5
For the year ended 30 September 2020 Estimated range R'b Statement of financial position Right of use asset 2.4 2.5 Lease liability (Debt) (3.0) (3.1) Deferred tax asset 0.1 0.2 Equity 0.5 0.4 Lease smoothing accrual under IAS 17 0.1 0.1
Estimated range R'b Income statement Depreciation 0.5 0.6 Finance cost 0.3 0.4 Income statement impact 0.8 1.0 Lease smoothing expense under IAS17 (0.7) (0.7) Net profit impact 0.1 0.3 33 CHANGES IN ACCOUNTING POLICIES continued IFRS 17 – Insurance Contracts (May 2017)
The new Standard establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 Insurance contracts.
The Standard outlines a general model, which is modified for insurance contracts with direct participation features, described as the Variable Fee Approach. The General Model is simplified if certain criteria are met by measuring the liability for remaining coverage using the Premium Allocation Approach.
The General Model will use current assumptions to estimate the amount, timing and uncertainty of future cash flows and it explicitly measures the cost of that uncertainty. It takes into account market interest rates and impact of the policy holders’ options and guarantees.
Profit from selling insurance contracts is deferred in a separate liability component on day one and aggregated in groups of insurance contracts. It is reported systematically through profit and loss over the period during which the insurers provide cover after making adjustments from changes in assumptions relating to future coverage.
Certain transactions as part of equipment's maintenance contracts and full maintenance lease contracts sold by Automotive are entered into by the group as insurer which falls within the definition of insurance contracts per IFRS 4 Insurance Contracts.
A project to fully assess the impact of IFRS 17 will be launched shortly; therefore it is not practicable to provide a reasonable and reliable estimate of the financial impact at this stage.
IFRS 17 will be effective for Barloworld for the first time in the year ending 30 September 2022.
The following new and amended standards are expected to have no or minimal impact on presentation, recognition and measurement:
–– Amendments to IAS 28 (October 2017), Long-term Interests in Associates and Joint Ventures, effective FY2020 –– Amendments to IAS 19 (February 2018), Plan Amendment, Curtailment or Settlement, effective FY2020 –– Amendments to IFRS 10 and IAS 28 (September 2014), Sale or Contribution of Assets between an Investor and its Associate or Joint Venture, effective FY2020 –– IFRIC 23, Uncertainty over Income Tax Treatments, effective FY2020 –– Annual Improvements to IFRS Standards 2015 – 2017 Cycle (December 2017), Annual Improvements to IFRSs: 2015 – 17 Cycle – IFRS 3, IFRS 11, IAS 12 and IAS 23 Amendments, effective FY2020
106 107 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
34 DIRECTORS’ REMUNERATION AND INTERESTS
Directors' remuneration The group remuneration philosophy and basis for determining performance bonuses is set out in the remuneration report. Other benefits determined below include Share Purchase Trust loans, expatriate benefits, retention payments, redundancy and termination payments and any other non-pensionable allowances or fringe benefits. The directors' and prescribed officers' remuneration for the year ended 30 September 2019 was as follows: Retirement and medical Car Other Special Total Salary contributions benefit benefits payments Bonus 2019 2019 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Executive directors Residents DG Wilson (retired 14 February 2019) 1 856 493 108 1 2 458 DM Sewela 9 049 1 381 301 3 5 863 16 597 N Lila ** (appointed 1 August 2019) 718 104 77 6 1 448 2 353 F Ighodaro (resigned 1 February 2019) 1 617 240 163 305 3 037 5 362 Total executive directors 13 240 2 218 649 315 4 485 5 863 26 770 Prescribed officers E Leeka ** 4 477 707 497 3 1 366 2 451 9 501 PK Rankin ** (resigned 31 May 2019) 3 023 569 113 7 400 4 112 K Mmutlana (appointed 1 June 2019) 1 405 245 57 3 1 552 3 262 DG Wilson (appointed 15 February 2019)^ 3 093 777 181 2 2 610 6 664 Total prescribed officers 11 998 2 298 848 15 1 766 6 613 23 538 Grand total 25 238 4 516 1 497 330 6 251 12 476 50 308
** Special payments relate to sign on/retention bonuses and separation agreements. ^ DG Wilson's bonus has not been apportioned.
Total fees 2019 R’000 Non-executive directors Residents NP Dongwana 1 134 HH Hickey 861 SS Mkhabela (retired 14 February 2019) 290 NP Mnxasana 848 SS Ntsaluba 1 197 DB Ntsebeza 2 682 NV Mokhesi (appointed 1 February 2019) 518 IO Shongwe (retired 14 February 2019) 299 Non-residents FNO Edozien 1 344 MD Lynch-Bell 1 466 P Schmid 1 331 H Molotsi (appointed 1 February 2019) 901 Total non-executive directors 12 871 Total directors' and prescribed officers remuneration 63 179 Retirement and medical Car Other Total Salary contributions benefit benefits Bonus 2018 2018 R’000 R’000 R’000 R’000 R’000 R’000 Executive directors Residents DG Wilson 4 655 1 187 272 3 4 756 10 873 DM Sewela 8 537 1 301 284 3 10 787 20 912 Total executive directors 13 192 2 488 556 6 15 543 31 785 Prescribed officers E Leeka ** 4 224 692 469 1 369 2 897 9 651 PK Rankin ** 4 278 805 161 1 375 3 929 10 548 Total prescribed officers 8 502 1 497 630 2 744 6 826 20 199 Grand total 21 694 3 985 1 186 2 750 22 369 51 984
** Other benefits relate to retention bonuses.
Total fees 2018 R’000 Non-executive directors Residents NP Dongwana 1 082 HH Hickey 732 SS Mkhabela 634 NP Mnxasana 516 SS Ntsaluba 1 042 DB Ntsebeza 2 465 IO Shongwe 665 Non-residents FNO Edozien 1 225 MD Lynch-Bell 1 423 P Schmid 1 716 Total non-executive directors 11 500 Total directors' and prescribed officers remuneration 63 484
108 109 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
34 DIRECTORS’ REMUNERATION AND INTERESTS continued Interest of directors and prescribed officers of the company in share capital The aggregate beneficial holdings as at 30 September 2019 of the directors and prescribed officers of the company and their immediate families (none of which has a holding in excess of 1%) in the issued ordinary shares of the company are detailed below. There have been no material changes in these shareholdings since that date. Number of shares at 30 September 2019 2019 2019 2018 2018 2018 Forfeitable Direct Indirect Forfeitable Direct Indirect Executive directors DM Sewela 112 860 18 442 77 638 127 500 18 442 7 953 DG Wilson 124 197 38 850 124 197 Total executive directors 112 860 142 639 77 638 166 350 142 639 7 953 Non-executive directors S Mkhabela 37 430 37 430 S Ntsaluba 5 155 3 370 DB Ntsebeza 48 864 44 364 IO Shongwe 89 277 3 184 89 277 3 184 Total non-executive directors 180 726 3 184 174 441 3 184 Prescribed officers E Leeka 42 050 41 302 57 810 6 262 K Mmutlana 45 780 7 326 PK Rankin 64 490 26 316 Total prescribed officers 87 830 48 628 122 300 32 578 Grand total 200 690 371 993 80 822 288 650 349 658 11 137 34 DIRECTORS’ REMUNERATION AND INTERESTS continued Interest of directors and prescribed officers of the company in share options, share appreciation rights and forfeitable shares The interests of the executive directors and prescribed officers in shares of the company provided in the form of options, share appreciation rights and forfeitable shares are shown in the table below:
Number exercised Price on (options exercise Exercise or and SAR)/ date exercisable Number Number vested/ (options (options allocated allocated lapsed in and SAR)/ and SAR)/ Award in prior in current current Closing Exercise vesting vesting date years year year number price price (FSP) date (FSP) Executive directors DM Sewela Share appreciation rights 2013 10 504 10 504 90.73 122.51 22-Jan-19 2016 65 350 65 350 72.77 29-Mar-19 2017 85 920 85 920 121.53 28-Mar-20 2018 137 540 137 540 177.71 29-Jan-21 2019 189 340 189 340 130.02 26-Feb-22 FSP – no performance conditions 2016 11 540 11 540 n/a 126.20 29-Mar-19 2017 14 860 14 860 n/a 28-Mar-20 2018 5 480 5 480 n/a 29-Jan-21 2019 7 880 7 880 n/a 26-Feb-22 FSP – with performance conditions 2016 34 610 34 610 n/a 126.20 29-Mar-19 2017 44 580 44 580 n/a 28-Mar-20 2018 16 430 16 430 n/a 29-Jan-21 2019 23 630 23 630 n/a 26-Feb-22 DG Wilson Share appreciation rights 2016 55 030 55 030 72.77 29-Mar-19 FSP – no performance conditions 2016 9 710 9 710 n/a 126.20 29-Mar-19 FSP – with performance conditions 2016 29 140 29 140 n/a 126.20 29-Mar-19
110 111 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
34 DIRECTORS’ REMUNERATION AND INTERESTS continued
Number exercised Price on (options exercise Exercise or and SAR)/ date exercisable Number Number vested/ (options (options allocated allocated lapsed in and SAR)/ and SAR)/ Award in prior in current current Closing Exercise vesting vesting date years year year number price price (FSP) date (FSP) Prescribed officers E Leeka Share appreciation rights 2013 45 740 45 740 90.73 124.00 7-Mar-19 2017 29 950 29 950 121.53 28-Mar-20 2018 55 270 55 270 177.71 29-Jan-21 2019 75 330 75 330 130.02 26-Feb-22 FSP – no performance conditions 2016 7 070 7 070 n/a 126.20 29-Mar-19 2017 5 180 5 180 n/a 28-Mar-20 2018 2 200 2 200 n/a 29-Jan-21 2019 3 130 3 130 n/a 26-Feb-22 FSP – with performance conditions 2016 21 220 21 220 n/a 126.20 29-Mar-19 2017 15 540 15 540 n/a 28-Mar-20 2018 6 600 6 600 n/a 29-Jan-21 2019 9 400 9 400 n/a 26-Feb-22 34 DIRECTORS’ REMUNERATION AND INTERESTS continued
Number exercised Price on (options exercise Exercise or and SAR)/ date exercisable Number Number vested/ (options (options allocated allocated lapsed in and SAR)/ and SAR)/ Award in prior in current current Closing Exercise vesting vesting date years year year number price price (FSP) date (FSP) K Mmutlana Share appreciation rights 2018 32 540 32 540 177.71 29-Jan-21 2019 46 800 46 800 130.02 26-Feb-22 FSP – no performance conditions 2017 24 602 24 602 n/a 28-Mar-20 2018 1 300 1 300 n/a 29-Jan-21 2019 1 950 1 950 n/a 26-Feb-22 FSP – with performance conditions 2017 8 198 8 198 n/a 28-Mar-20 2018 3 890 3 890 n/a 29-Jan-21 2019 5 840 5 840 n/a 26-Feb-22 PK Rankin Share appreciation rights 2016 45 150 45 150 72.77 126.20 29-Mar-19 2017 34 430 34 430 121.53 Lapsed 28-Mar-20 2018 55 270 55 270 177.71 Lapsed 29-Jan-21 FSP – no performance conditions 2016 7 970 7 970 n/a 126.20 29-Mar-19 2017 5 950 5 950 n/a Lapsed 31-May-19 2018 2 200 2 200 n/a Lapsed 31-May-19 FSP – with performance conditions 2016 23 910 23 910 n/a 126.20 29-Mar-19 2017 17 860 17 860 n/a Lapsed 31-May-19 2018 6 600 6 600 n/a Lapsed 31-May-19 Non-executive director IO Shongwe Share appreciation rights 2013 31 510 31 510 90.73 125.01 21-Feb-19
The value at commencement date of the forfeitable shares awarded on 27 February 2019 was R131 per share.
112 113 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
35 PRINCIPAL SUBSIDIARY COMPANIES
Interest of holding company Effective percentage Issued capital holdings Shares Indebtedness Amounts owing to subsidiaries Local currency 2019 2018 2019 2018 2019 2018 2019 2018 Type Currency amount % % Rm Rm Rm Rm Rm Rm Avis Southern Africa Limited H ZAR 17 903 911 100 100 106 106 21 91 Barloworld Botswana (Pty) Limited 2 H BWP 35 329 536 100 100 Barloworld Capital (Pty) Limited O ZAR 30 000 000 100 100 30 30 Barloworld Equipment (Pty) Limited O ZAR 2 100 100 Barloworld Equipment UK Limited ¹ O GBP 4 500 000 100 100 Vostochnaya Technica UK ¹ O GBP 34 500 000 100 100 Barloworld Holdings Limited ¹ H GBP 228 301 000 100 100 Barloworld Insurance Limited ¹ O GBP 4 100 000 100 100 63 63 Barloworld Investments (Pty) Limited H ZAR 900 100 100 108 108 3 626 3 626 Barloworld Logistics Africa (Pty) Limited O ZAR 2 859 920 100 100 Barloworld South Africa (Pty) Limited O ZAR 765 424 100 100 2 238 2 157 6 690 7 458 229 123 Barloworld Investments Namibia (Pty) Limited 3 H NAD 1 450 000 100 100 4 4 Zeda Car Leasing (Pty) Limited t/a Avis Fleet O ZAR 100 100 100 2 431 2 431 Barloworld Siyakhula (Pty) Limited O ZAR 25 000 100 100 100 Other subsidiaries * 187 187 434 434 37 45 2 736 2 655 13 202 14 040 266 168
All companies are incorporated in (or operate principally in) the Republic of South Africa except where otherwise indicated as follows:
1. United Kingdom 2. Botswana 3. Namibia
Keys to type of subsidiary
H – Holding companies
O – Operating companies Any material changes which have taken place during the year are dealt with in the appropriate operational reviews.
* A full list of subsidiaries and a list of the special resolutions of those companies are available to the shareholders, on request, from the registered office of the company. 35 PRINCIPAL SUBSIDIARY COMPANIES
Interest of holding company Effective percentage Issued capital holdings Shares Indebtedness Amounts owing to subsidiaries Local currency 2019 2018 2019 2018 2019 2018 2019 2018 Type Currency amount % % Rm Rm Rm Rm Rm Rm Avis Southern Africa Limited H ZAR 17 903 911 100 100 106 106 21 91 Barloworld Botswana (Pty) Limited 2 H BWP 35 329 536 100 100 Barloworld Capital (Pty) Limited O ZAR 30 000 000 100 100 30 30 Barloworld Equipment (Pty) Limited O ZAR 2 100 100 Barloworld Equipment UK Limited ¹ O GBP 4 500 000 100 100 Vostochnaya Technica UK ¹ O GBP 34 500 000 100 100 Barloworld Holdings Limited ¹ H GBP 228 301 000 100 100 Barloworld Insurance Limited ¹ O GBP 4 100 000 100 100 63 63 Barloworld Investments (Pty) Limited H ZAR 900 100 100 108 108 3 626 3 626 Barloworld Logistics Africa (Pty) Limited O ZAR 2 859 920 100 100 Barloworld South Africa (Pty) Limited O ZAR 765 424 100 100 2 238 2 157 6 690 7 458 229 123 Barloworld Investments Namibia (Pty) Limited 3 H NAD 1 450 000 100 100 4 4 Zeda Car Leasing (Pty) Limited t/a Avis Fleet O ZAR 100 100 100 2 431 2 431 Barloworld Siyakhula (Pty) Limited O ZAR 25 000 100 100 100 Other subsidiaries * 187 187 434 434 37 45 2 736 2 655 13 202 14 040 266 168
All companies are incorporated in (or operate principally in) the Republic of South Africa except where otherwise indicated as follows:
1. United Kingdom 2. Botswana 3. Namibia
Keys to type of subsidiary
H – Holding companies
O – Operating companies Any material changes which have taken place during the year are dealt with in the appropriate operational reviews.
* A full list of subsidiaries and a list of the special resolutions of those companies are available to the shareholders, on request, from the registered office of the company.
114 115 Notes to the consolidated annual financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
36 RELATED PARTY TRANSACTIONS
Various transactions are entered into by the company and its subsidiaries during the year with related parties. Unless specifically disclosed these transactions occurred under terms that are no less favourable than those entered into with third parties. Intra-group transactions are eliminated on consolidation. The following is a summary of other transactions with related parties during the year and balances due at year-end: Associates of Joint ventures R million the group of the group 2019 Goods and services sold to Bartrac Equipment Limited 6 Barloworld Maponya (Pty) Ltd 75 BHBW South Africa (Pty) Ltd 8 Barzem Enterprise (Pty) Ltd 56 56 89
Goods and services purchased from Bartrac Equipment Limited 26 Menlyn Maine Towers (Pty) Ltd 1 Irene Khaya Investments (Pty) Ltd 6 Barzem Enterprise (Pty) Ltd 1 8 26
Trade and other receivables BHBW South Africa (Pty) Ltd 4 4
Amounts due from related parties as at end of year Barloworld Maponya (Pty) Ltd 1 BHBW South Africa (Pty) Ltd 7 Barzem Enterprise (Pty) Ltd 8 8 8 2018 Goods and services sold to Bartrac Equipment Limited 74 Barloworld Maponya (Pty) Ltd 62 BHBW South Africa (Pty) Ltd 79 Barzem Enterprise (Pty) Ltd 112 112 215
Trade and other receivables BHBW South Africa (Pty) Ltd 29 29
Associates of Joint ventures R million the group of the group Amounts due from related parties as at end of year Barzem Enterprise (Pty) Ltd 11 11
Terms on other outstanding balances Unless otherwise noted, all outstanding balances are payable within 30 days, unsecured and not guaranteed. Associates and joint ventures The loans to associates and joint ventures are repayable on demand and bear interest at market related rates. The loan to Maponya was impaired by R9 million in the current year (2018: R24 million). Any further advances to the joint venture are covered by security and are short term in nature. Details of investments in associates and joint ventures are disclosed in note 13. Subsidiaries Details of investments in subsidiaries are disclosed in note 35. Directors Details regarding directors' remuneration and interests are disclosed in note 34, share options, share appreciation rights and forfeitable shares are disclosed in note 32. Transactions with key management and other related parties (including directors and prescribed officers) During the year, the Automotive trading segment sold motor vehicles to the value of R1.3 million (2018: R3.4 million) to key management, prescribed officers or close family members of related parties. Shareholders The principal shareholders of the company are disclosed on page 156 of the integrated report. Barloworld Medical Scheme Contributions of R191 million were made to the Barloworld Medical Scheme on behalf of employees (2018: R181 million). Barloworld Pension Fund Amounts recognised in the income statement in respect of defined benefit plans was a net expense of R148 million (2018: R70 million net expense). Other transactions In August 2019, Barloworld sold property to the non-controlling shareholders of NMI Durban South Motors (Pty) Ltd at fair value, resulting in a loss of R6 million. Effective 1 September 2019 Barloworld diluted its interest in NMI Durban South Motors (Pty) Ltd to 50% by selling its 1.18% controlling interest to the non-controlling shareholders. The profit on the sale of the 1.18% was R12 million, (R5 million for the business and R7 million for properties). 37 EVENTS AFTER THE REPORTING PERIOD
To the knowledge of the directors no material events have occurred between the balance sheet and the date of approval of these financial statements that would affect the ability of the users of the financial statements to make proper evaluations and decisions.
116 117
Company statement of comprehensive income FOR THE YEAR ENDED 30 SEPTEMBER 2019
Restated 2019 2018 Notes Rm Rm Continuing operations Dividends from subsidiaries 893 440 Rental revenue 2 10 Interest Income 588 663 Finance costs (528) (582) Administrative costs (78) (70) Profit before taxation 2 877 (652) Taxation 3 (49) (42) Profit after tax 828 (694) Profit from discontinued operations 10.1 120 132 Total comprehensive income for the year 948 (562) * The restatement is due to discontinued operations (refer to note 10).
Company statement of financial position FOR THE YEAR ENDED 30 SEPTEMBER 2019
2019 2018 Notes Rm Rm Assets Non-current assets 7 187 7 075 Plant and equipment 4 3 4 Investment property 5 58 632 Intangible assets 6 1 3 Investments 7 2 741 2 669 Loans to subsidiaries 8 4 384 3 767 Current assets 8 819 10 275 Loans to subsidiaries 8 8 817 10 273 Trade and other receivables 2 2 Assets classified as held for sale 10.2 676 93 Total assets 16 684 17 443
Equity and Liabilities Capital and reserves Share capital and premium 11 286 286 Other reserves 168 168 Retained Income 10 514 10 590 Interest of shareholders of Barloworld Limited 10 968 11 044 Non-current liabilities 4 401 3 781 Deferred taxation liability 9 18 14 Interest-bearing liabilities 12 4 384 3 767 Current liabilities 1 315 2 619 Loans from subsidiaries 8 168 168 Trade and other payables 15 3 Amounts due to bankers and short-term borrowings 13 1 132 2 448 Total equity and liabilities 16 684 17 443
118 119 Company statement of changes in equity FOR THE YEAR ENDED 30 SEPTEMBER 2019
Equity Total Share compen- Total Total share- capital and Revaluation sation other retained holders' premium reserve reserve* reserves income interest Notes Rm Rm Rm Rm Rm Rm Balance at 30 September 2017 286 3 165 168 10 911 11 365 Total comprehensive income for the year 551 551 Dividends on ordinary shares 16 – – – – (872) (872) Balance at 30 September 2018 286 3 165 168 10 590 11 044 Total comprehensive income for the year – – – – 948 948 Dividends on ordinary shares 16 – – – – (1 024) (1 024) Balance at 30 September 2019 286 3 165 168 10 514 10 968
* The equity compensation reserve relates to the IFRS 2 charge for the 2008 BEE transaction. Company statement of cash flows FOR THE YEAR ENDED 30 SEPTEMBER 2019
Restated 2019 2018 Notes Rm Rm Cash flows from operating activities Cash generated from operations A (52) (1 174) Dividends received from investments (excluding withholding tax) 893 440 Interest Income 588 663 Finance costs (528) (582) Taxation paid B (57) (51) Cash flow from operations 844 (704) Dividends paid (1 024) (872) Cash outflows from operating activities – continuing operations (180) (1 576) Cash outflows from operating activities – discontinued operations 128 141 Cash flows from investing activities Acquisition of investment property (18) (1) Other transfers to group – 4 Investments in subsidiaries (72) – Receipts on loans to subsidiaries 839 312 Net cash inflow from investing activities 749 315 Net cash inflow/(outflow) before financing activities 695 (1 120) Cash flows from financing activities Proceeds from long-term borrowings 621 399 Repayment of borrowings (1 316) (1 675) Proceeds from short term borrowings 1 283 Net cash (outflow)/inflow from financing activities (695) 7 Net movement in cash and cash equivalents – – Cash equivalents at the beginning of year – – Cash and cash equivalents at end of year – – NOTES TO THE COMPANY STATEMENT OF CASH FLOWS 2019 2018 for the year ended 30 September 2019 Rm Rm A. Cash generated from operations is calculated as follows: Profit before taxation 877 (652) Adjustments for: Depreciation 10 10 Amortisation of intangible assets 2 2 Dividends received (893) (440) Interest received (588) (663) Finance costs 528 582 Operating cash flows before movements in working capital (64) (1 161) Movement in payables 12 (13) Cash generated from operations (52) (1 174) B. Taxation paid is reconciled to amounts disclosed in the income statement as follows: Tax from continuing business operations (8) (9) Tax from discontinued business operations (49) (42) Cash amounts paid (57) (51)
120 121 Notes to the company financial statements FOR THE YEAR ENDED 30 SEPTEMBER 2019 1.1 ACCOUNTING FRAMEWORK 1.3 SIGNIFICANT JUDGEMENTS 1.4 REVENUE MADE BY MANAGEMENT The accounting policies of the Included in revenue are rentals earned company are the same as those of Preparing financial statements from leasing fixed property, dividends the group, where applicable (refer in conformity with IFRS requires received and interest received from to the consolidated annual financial estimates and assumptions that subsidiaries. statements). The policies detailed affect reported amounts and related Interest income and expense are below are those specifically applicable disclosures. Actual results could differ recognised in the statement of to the company. from these estimates. comprehensive income using the Accounting policies for which no Certain accounting policies have been effective interest method for all choice is permitted in terms of identified as involving particularly interest-bearing financial instruments. International Financial Reporting complex or subjective judgements or Dividends from subsidiaries are Standards have been included only if assessments, as follows: accrued for once declared by the management and directors concluded subsidiaries. that the disclosure would assist Asset lives and residual users in understanding the financial values 1.5 FINANCIAL ASSETS AND Plant and equipment is depreciated statements as a whole, taking into FINANCIAL LIABILITIES over its useful life taking into account account the materiality of the item (FINANCIAL INSTRUMENTS) being discussed. Accounting policies residual values, where appropriate. which are not applicable from time The actual lives and usage of the Financial instruments comprise to time, have been removed, but will assets and residual values are assessed investments in equity securities, loans be included if the type of transaction annually and may vary depending receivable, trade and other receivables occurs in future. on a number of factors. In reassessi (excluding prepayments), cash and The basis of preparation is consistent ng asset lives and usage, factors cash equivalents, borrowings, other with the prior year, except for such as technological innovation non-current liabilities (excluding new and revised standards and and product life cycles are taken into provisions), bank overdrafts and trade interpretations adopted per note 1.7. account. Residual value assessments and other payables. consider issues such as future market 1.6 INVESTMENT PROPERTY 1.2 UNDERLYING CONCEPTS conditions, the remaining life of the asset and projected disposal values. An investment property is either The financial statements are land or a building or part of a prepared on the going concern Non-current assets held building held by the owner or by the basis. Assets and liabilities and for sale lessee under a finance lease to earn income and expenses are not offset The company classified several rentals or for capital appreciation unless specifically permitted by an properties as held for sale in the or both. The cost model is applied accounting standard. Financial assets current year that are in the process in accounting for investment and financial liabilities are offset and of being sold to Khula Sizwe. All property, i.e. the investment the net amount reported only when the required approvals have been property is recorded at cost less a legally enforceable right to set off obtained with only the transfers any accumulated depreciation and the amounts exists and the intention of properties to take place, and impairment losses. Land is stated at is either to settle on a net basis or to therefore the impending sale is cost and not depreciated. realise the asset and settle the liability expected to complete within the next Investment property is depreciated simultaneously. Non-operating and financial year. As rental income from on a straight-line basis over 20 to capital items refer to expenses/income these properties is significant to the 50 years. that are unrelated to Barloworld’s company the properties have been core operations and fall outside disclosed as discontinued operations. the normal course of business. All financial information has been rounded to the nearest million unless stated otherwise. 1.7 CHANGES IN ACCOUNTING POLICIES Standards that have become applicable to the company for the first time for the 2019 financial year include: IFRS 9 Financial Instruments (IFRS 9) IFRS 15 Revenue from Contracts with Customers (IFRS 15). 1.7.1 IFRS 9 Financial instruments The adoption of IFRS 9 had the following impact on the group: Change in classification for the measurement categories for financial instruments Change from the incurred loss model to the expected credit loss (ECL) model to determine impairment of financial assets Classification, initial measurement and subsequent measurement The table and the accompanying notes that follow explain the previous and new classification measurement categories for each class of the company’s financial instruments as at 1 October 2018. Financial assets Please note that unless otherwise stated the carrying amounts under the new measurement categories remains the same as the previous categories Financial Instrument Original category under IAS 39 New category under IFRS 9 Amounts due from subsidiaries Amortised cost Amortised cost Unlisted Investments (Equity instruments) Available for sale (FVTOCI) FVTOCI Trade and other receivables (Debt instruments) Amortised cost Amortised cost Financial liabilities Interest-bearing non-current liabilities Amortised cost Amortised cost Amounts due to subsidiaries Amortised cost Amortised cost Trade and other payables Amortised cost Amortised cost Amounts due to bankers and short-term loans Amortised cost Amortised cost Impairment Before the adoption of IFRS 9 the company calculated the allowance for credit losses using the incurred loss model. Under the incurred loss model, the company assessed whether there was any objective evidence of impairment at the end of each reporting period. If such evidence existed the allowance for credit losses in respect of financial assets at amortised cost were calculated as the difference between the asset’s carrying amount and its recoverable amount, being its present value of the estimated future cash flows discounted at the original effective interest rate. Under IFRS 9 the company determines the allowance for credit losses based on the expected credit loss (ECL) model to assess whether financial assets measured at amortised cost are impaired. Please refer to note 19 of the consolidated annual financial statements for the policy on impairment of financial assets. Transition The company has adopted IFRS 9 using the modified retrospective transition approach, at the date of initial application (i.e. 1 October 2018). Accordingly, information relating to 30 September 2018 does not reflect the requirements of IFRS 9 but rather those of IAS 39 and the information presented for 2018 has not been restated. The adoption of IFRS 9 has not resulted in a significant impact on the company.
1.7.2 IFRS 15 Revenue from Contracts with Customers The company has adopted IFRS 15 using the modified retrospective transition approach, at the date of initial application (i.e. 1 October 2018). Accordingly, the information presented for 2018 has not been restated. The adoption of IFRS 15 has not had a material impact on the company.
122 123 Notes to the company financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER 2019
Restated 2019 2018 2 PROFIT BEFORE TAX Rm Rm Operating profit is arrived at as follows: Total income 1 483 1 113 Less: finance costs (528) (582) Less: administrative costs (78) (70) Operating profit 877 461 Administrative costs include the following: Depreciation (notes 4 and 5) 10 10 Amortisation of intangible assets (note 6) 2 2 Administration, management and technical fees paid – 4 Auditors' remuneration 4 3
2019 2018 3 TAXATION Rm Rm Foreign and withholding taxation (4) (3) Current year (35) (40) Prior year (5) – (44) (43) Deferred taxation Current year (4) 1 Tax from the continuing operations (49) (42) Tax from the discontinued operations (8) (9) Taxation attributable to the company (57) (51)
2019 2018 % % Reconciliation of rate of taxation: South Africa normal taxation rate 28.0 28.0 Reduction in rate of taxation (23.8) (20.5) Adjustment due to exemption for dividend income (23.8) (20.5) Taxation on unprovided temporary differences – – Increase in the rate of taxation 1.4 1.6 Disallowable charges* 0.9 1.0 Prior year 0.5 – Withholding taxation 0.0 0.6 Taxation as a percentage of profit before taxation 5.6 9.1 * Disallowable charges include depreciation, interest paid to SARS, consulting fees and other expenses attributable to non taxable income. Accumulated Net book Cost depreciation value 4 PLANT AND EQUIPMENT Rm Rm Rm 2019 Equipment and furniture 24 21 3 24 21 3 2018 Equipment and furniture 24 20 4 24 20 4 There are no assets encumbered. Equipment and furniture Rm Movement of net book value of plant and equipment 2019 Net balance at 1 October 2018 4 Depreciation (1) Net balance at 30 September 2019 3
Accumulated Net book Cost depreciation value Rm Rm Rm 5 INVESTMENT PROPERTY 2019 Freehold land and buildings 67 9 58 67 9 58 2018 Freehold land and buildings 729 97 632 729 97 632 There are no assets encumbered. Freehold land and buildings Rm Movement of net book value of investment property 2019 Net balance at 1 October 2018 632 Additions 18 Assets held for sale (note 10) (583) 67 Depreciation (note 2) (9) Net balance at 30 September 2019 58 2018 Net balance at 1 October 2017 737 Additions 1 Assets held for sale (note 10) (93) Disposal (4) 641 Depreciation (note 2) (9) Net balance at 30 September 2018 632 The register of land and buildings is open for inspection at the registered office of the company.
124 125 Notes to the company financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER 2019
5 INVESTMENT PROPERTY (CONTINUED) 2019 The fair value for the above freehold land and buildings (including the properties held for sale) amounted to R1 015 million as per the latest valuation performed in September 2018. The fair value measurement of the properties is considered a level 3 measurement in accordance with IFRS 13. The calculation of the fair values of the properties was based on the income approach method in which the estimated net annual rent for the forward period of 12 months is capitalised at an appropriate rate of interest to reflect the perceived risk in the investment. The average capitalisation rate applied in determining the properties fair value was 9.2%. Trademarks Rm 6 INTANGIBLE ASSETS 2019 Cost At 1 October 2018 37 At 30 September 2019 37 Accumulated amortisation At 1 October 2018 34 Charge for the year (note 2) 2 At 30 September 2019 36 Carrying amount At 30 September 2019 1 2018 Cost At 1 October 2017 37 At 30 September 2018 37 Accumulated amortisation At 1 October 2017 32 Charge for the year (note 2) 2 At 30 September 2018 34 Carrying amount At 30 September 2018 3
2019 2018 Rm Rm 7 Investments Investment in subsidiaries 2 736 2 655 Unlisted investments 5 14 2 741 2 669 2019 2018 Rm Rm 8 Loans owing from/(to) subsidiaries Long-term loans 4 384 3 767 Short-term loans 8 817 10 273 Amounts owing from subsidiaries * 13 202 14 040 Amounts owing to subsidiaries ** (168) (168) * The interest-bearing loans are payable on demand, with the interest rate calculated using the weighted average cost of external borrowings for Barloworld Treasury plus a margin of 0.25%. Non-interest bearing loans are not payable on demand but are long-term. There is no history of credit losses on loans to subsidiaries and management expect these loans to continue performing, and therefore, no expected credit losses have been recognised on these loans.
** The R168 million owing to subsidiaries is made up of a R45 million interest bearing loan from Barloworld South Africa (Pty) Ltd which is payable on demand, with the interest rate calculated using the weighted average cost of external borrowings for Barloworld Treasury plus a margin of 0.25%. The balance of R123 million includes various group equity loans which are interest free with no fixed repayment terms.
2019 2018 Rm Rm 9 DEFERRED TAXATION LIABILITY Movement of deferred taxation Balance at the beginning of year (14) (15) Recognised in the statement of comprehensive income (4) 1 Balance at end of year (18) (14)
Analysis of deferred taxation by type of temporary difference Other temporary differences (14) (15) (14) (15) Amount of deferred taxation recognised in the statement of comprehensive income Other temporary differences (4) 1 (4) 1
10 DISCONTINUED OPERATIONS AND ASSETS CLASSIFIED AS HELD FOR SALE 10.1 Discontinued operations As part of the strategy to unlock value in our underlying businesses and the focus on disciplined allocation of capital management has taken the firm decision to sell properties (land and buildings) as part of the groups B-BBEE transaction “Khula Sizwe”. This transaction was approved by shareholders on 14 February 2019 and the black public offer was fully subscribed. The transaction is expected to be fully implemented within 12 months. This business represents a significant line of business and has therefore been disclosed as a discontinued operation at 30 September 2019 for Barloworld Limited. 2 019 2018 Results from discontinued operations are as follows: Rm Rm Revenue – rental income (128) (141) Profit before taxation (128) (141) Taxation 8 9 Profit from discontinued operations per income statement (120) (132)
The cash flows from the discontinued operations are as follows: Cash flows from operating activities 128 141 Cash flows from investing activities Cash flows from financing activities
126 127 Notes to the company financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER 2019
10.2 Assets classified as held for sale The assets held for sale within the Corporate division relate to the Barlow Park property owned by Barloworld Limited which is in the process of being sold into a consortium of investors with the aim of redeveloping the site into a multi-use precinct and the properties to be sold to Khula Sizwe in line with the BBBEE Khula Sizwe deal as per note 10.1. There have been unexpected delays in the commencement of the Barlow Park project, however, there has been good progress in the latter part of the year and it is expected that the consortium will be in a position to commence operations in the coming 12 months. 2019 2018 Rm Rm Movement of net book value of investment property Investment property at cost 802 113 Accumulated Depreciation (126) (20) Net balance at 30 September 2019 676 93 The company has committed R1.734 million for purchase of investment properties from underlying subsidiaries as part of the Khula Sizwe deal.
2019 2018 Rm Rm 1 1 SHARE CAPITAL AND PREMIUM Authorised share capital 500 000 6% non-redeemable cumulative preference shares of R2 each (2018: 500 000) 1 1 400 000 000 ordinary shares of 5 cents each (2018: 400 000 000) 20 20 21 21 Issued share capital 375 000 6% non-redeemable cumulative preference shares of R2 each (2019: 375 000) 1 1 212 692 583 ordinary shares of 5 cents each (2019: 212 692 583) 11 11 12 12 Share premium: 274 274 Total issued share capital and premium 286 286
2019/2020 At the general meeting of the company held on 14 February 2019 to approve the group B-BBEE transaction Khula Sizwe, Barloworld shareholders approved the issue of 6 578 121 shares to the Barloworld Empowerment foundation. These shares will be issued by the company in the first quarter of the 2020 financial year. 2019 2018 Rm Rm 1 2 INTEREST-BEARING LIABILITIES Total long-term borrowings 4 965 5 440 Less: Current portion redeemable and repayable within one year (note 13) (581) (1 673) South African rand: Interest-bearing 4 384 3 767
Barloworld Bonds Comparable Treasury Spread Yield 2019 2018 Certificate Issued Maturity Stock bps % Type Rm Rm BAW11 14-Jun-11 01-Oct-18 R204 156 9,80 Fixed rate (NACS) – 460 BAW17 05-Dec-13 05-Dec-18 3-month Jibar 148 8,49 Floating rate – 714 BAW18 05-Dec-13 09-Jan-00 3-month Jibar 170 8,51 Floating rate 355 355 BAW19 05-Dec-13 05-Dec-20 R208 167 9,56 Fixed rate (NACS) 472 472 BAW21 24-Mar-15 24-Mar-22 R208 210 9,30 Fixed rate (NACS) 710 710 BAW22 07-Dec-15 07-Dec-22 3-month Jibar 200 8,81 Floating rate 252 252 BAW24 30-Sep-16 14-Jan-00 3-month Jibar 185 8,88 Floating rate – 501 BAW25 09-May-17 08-May-20 3-month Jibar 180 8,64 Floating rate 582 582 BAW26U 11-May-17 11-May-21 3-month Jibar 195 8,79 Floating rate 250 250 BAW27U 11-May-17 11-May-22 3-month Jibar 210 8,94 Floating rate 250 250 BAW28 06-Jun-17 06-Jun-22 3-month Jibar 205 8,86 Floating rate 500 500 BAW29 22-Feb-18 22-Feb-23 3-month Jibar 180 8,63 Floating rate 400 400 BAW30 05-Dec-18 05-Dec-21 3-month Jibar 139 8,20 Floating rate 700 – BAW31 30-Sep-19 30-Sep-22 3-month Jibar 130 8,09 Floating rate 500 – Fees Capitalised (6) (6) 4 965 5 440
2019 2018 Rm Rm 1 3 AMOUNTS DUE TO BANKERS AND SHORT-TERM BORROWINGS Short-term borrowings* 550 775 Current portion of long-term borrowings 581 1 673 1 132 2 448 * Short-term borrowings The short term loans are made up of the interest accrual for the Barloworld bonds and commercial paper.
2019 2018 Rm Rm 1 4 CONTINGENT LIABILITIES Guarantees for loans, overdrafts and liabilities of subsidiaries 3 301 3 445 Contingent liabilities include performance guarantees, suretyships and guarantees issued to bankers on behalf of subsidiaries, in respect of banking facilities to the extent that they are utilised.
128 129 Notes to the company financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER 2019
1 5 FINANCIAL INSTRUMENTS The company adopted IFRS 9 retrospectively on 1 October 2018, using the modified retrospective approach, thus without restating comparative information. The company also adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosure. Accordingly, information relating to 30 September 2018 does not reflect the requirements of IFRS 9 but rather those of IAS 39 Financial Instruments: Recognition and Measurement. Refer to note 33 of the consolidated financial statements for details regarding the initial application of IFRS 9 and the resulting impact. The company's financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, bank borrowings, money and capital market borrowings, loans to and from subsidiaries.
15.1 Categories of financial instruments 2019 2018 Amortised Total Amortised Held to Total Rm cost FVTOCI amount cost maturity amount Assets Amounts due from subsidiaries (Debt instruments) 13 201 13 201 14 040 14 040 Unlisted Investments (Equity instrument)* 5 5 14 14 Trade and other receivables (Debt instruments) 2 2 2 2 13 203 5 13 208 14 042 14 14 056
2019 2018 Amortised Amortised Rm cost cost Liabilities Interest-bearing non-current liabilities 4 384 3 767 Trade and other payables 15 3 Amounts due to subsidiaries (Debt instruments) 168 168 Amounts due to bankers and short-term loans 1 132 2 448 Total liabilities 5 699 6 386
15.2 Financial risk management a. Capital risk management The company manages its capital to ensure that the company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of debt and equity. The overall strategy remains unchanged from the previous year. The capital structure of the company consists of debt (refer note 12 & 13) and equity attributable to equity holders of Barloworld Limited, comprising issued capital (note 11), reserves and retained earnings (statement of changes in equity). A finance committee consisting of senior executives of the company meets on a regular basis to review the capital structure based on the cost of capital and the risks associated with each class of capital, analyse currency and interest rate exposure and to re-evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. b. Market risk i) Currency risk The company is not exposed to any significant currency risk. ii) Interest rate risk The company manages the exposure to interest rate risk by maintaining a balance between fixed and floating rate borrowings. The interest rate characteristics of new borrowings and the refinancing of existing borrowings are structured according to expected movements in interest rates. There has been no change in the current year to this approach. 2019 2018 Rm Rm The interest rate profile of total borrowings is as follows: Interest rates Loans at fixed rates of interest 3 783 1 642 Loans linked to South Africa floating interest rates 1 182 3 798 4 965 5 440
Interest rate sensitivity analysis A change in interest rates by 1% would result in a change in profit or loss of R50 million (2018: R54 million). There has been no change during the current year in the company's approach to managing other price risk. c. Credit risk The potential area of credit risk is short-term cash investments, equity loans and inter group loans. It is company policy to deposit short‑term cash investments with major banks and financial institutions with strong credit ratings.
2019 2018 Rm Rm Maximum exposure to credit risk (excl collateral held) Financial assets 13 204 14 042 d. Liquidity risk The company manages liquidity risk by monitoring forecast cash flows and maintaining a balance between long and short-term borrowings. There has been no change to this approach in the current year. Maturity profile of financial liabilities The maturity profile of the financial instruments is summarised as follows (based on contractual undiscounted cash flows): Repayable during the year ending 30 September Total owing 2022– 2024 and 2019 2020 2023 onwards Rm Rm Rm Rm Interest-bearing liabilities 7 614 1 286 6 328 0
Total owing 2020– 2023 and 2018 2019 2022 onwards Interest-bearing liabilities 5 440 1 673 3 767 0
130 131 Notes to the company financial statements CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER 2019
2019 2018 1 6 DIVIDENDS Rm Rm Ordinary shares Final dividend No 180 paid on 14 January 2019: 317 cents per share (2018: No 178 - 265 cents per share) 674 564 Interim dividend No 181 paid on 10 June 2019: 165 cents per share (2018: No 179 - 145 cents per share) 350 308 Paid to Barloworld Limited shareholders 1 024 872
On 18 November 2019 the directors declared dividend No 182 of 297 cents (gross) per share subject to the applicable dividends tax levied in terms of the Income Tax Act (Act No. 58 of 1962)(as amended) (“the Income Tax Act”). A special dividend of 228 cents (182.4 cents net of tax) was declared by the board on 18 November 2019 (subject to South African Reserve Bank approval). In accordance with paragraphs 11.17 (a) (i) to (x) and 11.17(c) of the JSE Listings Requirements the following additional information is disclosed: ○○ The dividend has been declared out of income reserves; ○○ Local dividends tax rate is 20% (twenty percent); ○○ Barloworld has 212 692 583 ordinary shares in issue; ○○ The gross local dividend amount is 297 cents per ordinary share; ○○ The net dividend amount is 237.6 cents per share;
In compliance with the requirements of Strate and the JSE Limited, the following dates are applicable: Date declared Monday 18 November 2019 Last day to trade cum dividend Tuesday 7 January 2020 Shares trade ex dividend Wednesday 8 January 2020 Record date Friday 10 January 2020 Payment date Monday 13 January 2020 Share certificates may not be dematerialised or rematerialised between Wednesday, 9 January 2019 and Friday, 11 January 2019, both days inclusive.
Analysis of dividends declared in respect of current year's earnings: 2019 2018 Ordinary dividends per share Cents Cents Interim dividend 165 145 Final dividend 297 317 462 462
Special dividend per share 228 – 6% cumulative non-redeemable preference shares Preference dividends totalling R22 500 were declared on each of the following dates: 1 October 2019 (paid on 4 November 2019) 21 May 2019 (paid on 24 June 2019) 1 October 2018 (paid on 5 November 2018) 3 April 2018 (paid on 7 May 2018) 1 7 PRINCIPAL SUBSIDIARY COMPANIES Please refer to note 35 of the consolidated annual financial statements.
1 8 RELATED PARTY TRANSACTIONS The following is a summary of transactions with related parties during the year and balances due at year-end: 2019 2018 Rm Rm With related parties of the company Rental revenue 130 151 Barloworld South Africa (Pty) Ltd 127 149 BHBW South Africa (Pty) Ltd 3 2
Dividends from subsidiaries 893 440 Barloworld South Africa (Pty) Ltd 571 0 Barloworld Motor (Pty) Ltd 62 161 Barloworld Investments (Pty) Ltd 237 228 Barloworld Equipment Lesotho (Pty) Ltd 23 51
Interest revenue from subsidiaries 588 663 Barloworld South Africa (Pty) Ltd 588 663
Inter group loans and other amounts due from related parties as at end of year 13 202 14 040 Barloworld South Africa (Pty) Ltd 6 620 7 457 Barloworld Investments (Pty) Ltd 3 626 3 626 Zeda Car Leasing (Pty) Ltd 2 431 2 431 Avis Southern Africa Ltd 91 91 Other related parties 434 435
Inter group loans and other amounts due to related parties as at end of year 168 168 Barloworld South Africa (Pty) Ltd 123 123 Other related parties 45 45 *Refer to note 35 of the consolidated annual financial statements for detail. Various transactions are entered into by the company and its subsidiaries during the year with related parties. Unless specifically disclosed these transactions occurred under terms that are no less favourable than those entered into with third parties. There are no doubtful debt provisions raised in respect of amounts due to/from related parties and no bad debts incurred during the year on these balances. Details regarding directors' and key management remuneration and interest, share options, share appreciation rights and forfeitable shares are disclosed in note 34 of the consolidated annual financial statements.
1 9 EVENTS AFTER THE REPORTING PERIOD To the knowledge of the directors no material events have occurred between the balance sheet date and the date of approval of these financial statements that would affect the ability of the users of the financial statements to make proper evaluations and decisions.
The consolidated financial statements are available on www.barloworld.com
132 133 Consolidated seven-year summary FOR THE YEAR ENDED 30 SEPTEMBER
Compound annual growth 2019 2018* 2017 2016* 2015 2014 2013* % Rm Rm Rm Rm Rm Rm Rm INCOME STATEMENT CONTINUING OPERATIONS Revenue (0.8%) 56 834 60 094 61 959 62 074 62 720 62 101 59 498 Operating profit before items listed below (0.8%) 5 145 5 536 6 694 6 486 6 479 6 170 5 389 Impairment losses on financial assets and contract assets (124) Depreciation (1 561) (1 634) (2 468) (2 294) (2 355) (2 198) (1 940) Amortisation of intangible assets (115) (140) (144) (105) (129) (142) (136) Operating profit before B-BBEE transaction charge 3 345 3 762 4 082 4 087 3 995 3 830 3 313 B-BBEE transaction charge (73) (251) Operating profit (0.2%) 3 273 3 762 4 082 4 087 3 744 3 830 3 313 Fair value adjustments on financial instruments 32 (122) (209) (209) (198) (156) (47) Finance costs 1.4% (1 085) (1 145) (1 329) (1 331) (1 252) (1 117) (1 000) Income from investments 192 140 109 111 67 39 28 Profit before non-operating and capital items 0.8% 2 411 2 635 2 653 2 658 2 361 2 596 2 294 Non-operating and capital items 87 (248) (155) 85 (6) (66) (79) Profit before taxation 2 498 2 387 2 498 2 743 2 355 2 530 2 215 Taxation (771) (870) (565) (796) (808) (837) (729) Profit after taxation 1 727 1 517 1 933 1 947 1 547 1 693 1 486 Income from associates and joint ventures 231 235 93 3 287 217 185 Net profit from continuing operations 1 958 1 752 2 026 1 950 1 834 1 910 1 671 DISCONTINUED OPERATIONS Profit/(loss) from discontinued operations 519 2 168 (269) 29 428 46 Net profit 2 477 3 920 1 757 1 979 1 834 2 338 1 717 Attributable to: Owners of Barloworld Limited 2 428 3 846 1 643 1 883 1 713 2 143 1 609 Non-controlling interests in subsidiaries 49 74 114 96 121 195 108 2 477 3 920 1 757 1 979 1 834 2 338 1 717 Headline earnings from continuing operations 1.8% 1 831 1 919 2 053 1 778 1 960 1 813 1 645 * Restated for the treatment of discontinued operations. Compound annual growth 2019 2018* 2017 2016* 2015 2014 2013* % Rm Rm Rm Rm Rm Rm Rm INCOME STATEMENT CONTINUING OPERATIONS Revenue (0.8%) 56 834 60 094 61 959 62 074 62 720 62 101 59 498 Operating profit before items listed below (0.8%) 5 145 5 536 6 694 6 486 6 479 6 170 5 389 Impairment losses on financial assets and contract assets (124) Depreciation (1 561) (1 634) (2 468) (2 294) (2 355) (2 198) (1 940) Amortisation of intangible assets (115) (140) (144) (105) (129) (142) (136) Operating profit before B-BBEE transaction charge 3 345 3 762 4 082 4 087 3 995 3 830 3 313 B-BBEE transaction charge (73) (251) Operating profit (0.2%) 3 273 3 762 4 082 4 087 3 744 3 830 3 313 Fair value adjustments on financial instruments 32 (122) (209) (209) (198) (156) (47) Finance costs 1.4% (1 085) (1 145) (1 329) (1 331) (1 252) (1 117) (1 000) Income from investments 192 140 109 111 67 39 28 Profit before non-operating and capital items 0.8% 2 411 2 635 2 653 2 658 2 361 2 596 2 294 Non-operating and capital items 87 (248) (155) 85 (6) (66) (79) Profit before taxation 2 498 2 387 2 498 2 743 2 355 2 530 2 215 Taxation (771) (870) (565) (796) (808) (837) (729) Profit after taxation 1 727 1 517 1 933 1 947 1 547 1 693 1 486 Income from associates and joint ventures 231 235 93 3 287 217 185 Net profit from continuing operations 1 958 1 752 2 026 1 950 1 834 1 910 1 671 DISCONTINUED OPERATIONS Profit/(loss) from discontinued operations 519 2 168 (269) 29 428 46 Net profit 2 477 3 920 1 757 1 979 1 834 2 338 1 717 Attributable to: Owners of Barloworld Limited 2 428 3 846 1 643 1 883 1 713 2 143 1 609 Non-controlling interests in subsidiaries 49 74 114 96 121 195 108 2 477 3 920 1 757 1 979 1 834 2 338 1 717 Headline earnings from continuing operations 1.8% 1 831 1 919 2 053 1 778 1 960 1 813 1 645 * Restated for the treatment of discontinued operations.
134 135 Consolidated seven-year summary CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
Compound annual growth 2019 2018* 2017 2016* 2015 2014 2013* % Rm Rm Rm Rm Rm Rm Rm STATEMENT OF FINANCIAL POSITION Assets Property, plant and equipment 7 879 12 657 12 659 13 806 14 380 12 614 11 356 Goodwill and intangible assets 2 935 3 401 3 534 3 728 3 240 3 041 3 219 Investments in associates, joint ventures and other non-current assets 2 965 2 463 1 737 1 518 1 503 937 794 Deferred taxation assets 761 710 683 1 127 783 695 654 Non-current assets 14 540 19 231 18 613 20 179 19 906 17 287 16 023 Current assets 26 871 29 531 24 368 25 015 28 052 26 719 24 213 Assets classified as held for sale 5 780 497 3 343 828 197 – 371 Total assets 47 191 49 259 46 324 46 022 48 155 44 006 40 607 Equity and liabilities Capital and reserves Share capital and premium 441 441 441 441 282 316 316 Reserves and retained income 23 182 21 791 19 834 18 501 19 144 16 566 15 129 Interest of shareholders of Barloworld Limited 23 623 22 233 20 275 18 942 19 426 16 882 15 445 Non-controlling interest 272 517 602 737 616 604 462 Interest of all shareholders 23 895 22 750 20 877 19 679 20 042 17 486 15 907 Non-current liabilities 7 336 8 917 10 852 12 446 12 078 9 700 9 612 Deferred taxation liabilities 356 632 538 703 571 377 421 Non-current liabilities 6 980 8 285 10 314 11 743 11 507 9 323 9 190 Current liabilities 13 738 17 466 13 798 13 830 15 992 16 820 14 983 Liabilities directly associated with assets classified as held for sale 2 222 126 797 67 43 – 106 Total equity and liabilities 47 191 49 259 46 324 46 022 48 155 44 006 40 607 STATEMENT OF CASH FLOWS Cash inflow/(outflow) from operations 3 550 1 700 3 734 5 715 (824) 1 047 2 607 Dividends paid (including non-controlling interest) (1 057) (953) (803) (772) (814) (742) (598) Net cash retained from operating activities 2 493 747 2 931 4 943 (1 638) 305 2 009 Net cash (used in)/generated from investing activities (486) 1 891 (329) (1 436) (1 826) (69) (1 349) Net cash (used in)/generated from financing activities (2 858) 1 080 (1 642) (2 753) 1 532 1 070 (620) Net (decrease)/increase in cash and cash equivalents (851) 3 718 960 754 (1 933) 1 306 40
* Restated for the treatment of discontinued operation. Compound annual growth 2019 2018* 2017 2016* 2015 2014 2013* % Rm Rm Rm Rm Rm Rm Rm STATEMENT OF FINANCIAL POSITION Assets Property, plant and equipment 7 879 12 657 12 659 13 806 14 380 12 614 11 356 Goodwill and intangible assets 2 935 3 401 3 534 3 728 3 240 3 041 3 219 Investments in associates, joint ventures and other non-current assets 2 965 2 463 1 737 1 518 1 503 937 794 Deferred taxation assets 761 710 683 1 127 783 695 654 Non-current assets 14 540 19 231 18 613 20 179 19 906 17 287 16 023 Current assets 26 871 29 531 24 368 25 015 28 052 26 719 24 213 Assets classified as held for sale 5 780 497 3 343 828 197 – 371 Total assets 47 191 49 259 46 324 46 022 48 155 44 006 40 607 Equity and liabilities Capital and reserves Share capital and premium 441 441 441 441 282 316 316 Reserves and retained income 23 182 21 791 19 834 18 501 19 144 16 566 15 129 Interest of shareholders of Barloworld Limited 23 623 22 233 20 275 18 942 19 426 16 882 15 445 Non-controlling interest 272 517 602 737 616 604 462 Interest of all shareholders 23 895 22 750 20 877 19 679 20 042 17 486 15 907 Non-current liabilities 7 336 8 917 10 852 12 446 12 078 9 700 9 612 Deferred taxation liabilities 356 632 538 703 571 377 421 Non-current liabilities 6 980 8 285 10 314 11 743 11 507 9 323 9 190 Current liabilities 13 738 17 466 13 798 13 830 15 992 16 820 14 983 Liabilities directly associated with assets classified as held for sale 2 222 126 797 67 43 – 106 Total equity and liabilities 47 191 49 259 46 324 46 022 48 155 44 006 40 607 STATEMENT OF CASH FLOWS Cash inflow/(outflow) from operations 3 550 1 700 3 734 5 715 (824) 1 047 2 607 Dividends paid (including non-controlling interest) (1 057) (953) (803) (772) (814) (742) (598) Net cash retained from operating activities 2 493 747 2 931 4 943 (1 638) 305 2 009 Net cash (used in)/generated from investing activities (486) 1 891 (329) (1 436) (1 826) (69) (1 349) Net cash (used in)/generated from financing activities (2 858) 1 080 (1 642) (2 753) 1 532 1 070 (620) Net (decrease)/increase in cash and cash equivalents (851) 3 718 960 754 (1 933) 1 306 40
* Restated for the treatment of discontinued operation.
136 137 Consolidated seven-year summary CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
Targets 2019 2018* 2017 2016* 2015 2014 2013* PERFORMANCE PER ORDINARY SHARE Weighted average number of ordinary shares in issue during the year net of buy-back (000) 211 085 210 875 210 780 211 425 211 843 211 669 211 011 Net profit attributable to ordinary shareholders of Barloworld Limited SA cents 1 150.2 1 823.8 779.6 890.5 808.7 1 012.3 763.0 Earnings per share Weighted average number of ordinary shares in issue, net of buy-back US cents 80.4 140.2 58.2 60.4 67.5 95.8 82.2 Earnings per share – continuing operations As above, but using results from continuing results only SA cents 907.2 801.9 907.2 876.8 808.7 810.3 739.9 US cents 63.4 61.6 67.8 59.4 67.5 76.7 79.7 Net profit attributable to ordinary shareholders of Barloworld Limited + goodwill impairment -/(+) non trading profits/(losses) net of tax and non-controlling 1 192.1 883.4 838.1 813.8 882.5 820.8 Headline earnings per share interest thereof SA cents 1 100.0 Weighted average number of ordinary shares in issue, net of buy-back US cents 76.8 91.6 66.0 56.8 67.9 83.5 88.4 SA cents 867.4 910.0 974.5 840.9 925.5 856.5 779.6 Headline earnings per share – continuing operations As above, but using results from continuing results only US cents 60.6 70.0 72.8 57.0 77.3 81.0 84.0 Headline earnings per share – continuing SA cents 1 031.1 910.0 875.9 752.2 925.5 856.5 779.6 operations excluding B-BBEE and finance cost on As above, but using results from continuing results normalised^ discontinued operations US cents 72.0 70.0 65.4 51.0 77.3 81.0 84.0 SA cents 462.0 462.0 390.0 345.0 345.0 320.0 291.0 Dividends per share Interim and final dividends declared out of current year's earnings US cents 32.3 35.5 29.1 23.4 28.8 30.3 31.3 Headline earnings (continuing operations) + B-BBEE transaction charge (net Dividend cover of taxation) times 1.9 2.5 2.1 2.3 2.6 2.5 2.5 Dividends paid out of current year's earnings Interest of shareholders of Barloworld Limited, including investments at market value SA cents 11 182 10 531 9 533 8 997 9 157 7 941 7 266 Net asset value per share Number of ordinary shares in issue, net of buy-back US cents 737 744 706 654 661 703 722 ^ Headline earnings per share – continuing operations excluding B-BBEE transactions and material disposal, as per the Barloworld long term incentive scheme performance measurements. PROFITABILITY AND ASSET MANAGEMENT Operating profit before B-BBEE charge and goodwill impairment Operating margin – Group – excluding B-BBEE % >6 8.5 9.0 6.1 6.2 6.4 6.0 5.3 Revenue – group operations Operating margin – Continuing operations – Operating profit before B-BBEE charge and goodwill impairment % >6 5.9 6.3 6.6 6.6 6.4 6.2 5.6 excluding B-BBEE Revenue – continuing operations Revenue – group operations Net asset turn times >3 1.7 1.8 2.2 2.1 2.1 2.4 2.6 Average net assets Operating profit + B-BBEE transaction charge + investment income + income from % >18 16.0 17.5 13.4 13.3 13.4 15.3 14.8 Return on net assets (Group) Associates and Joint Ventures Return on net assets (Trading businesses) As per above Group calculation but excluding leasing and car rental businesses % >20 16.7 19.0 12.6 12.7 12.8 15.2 15.3 Operating profit + B-BBEE transaction charge + investment income + income from Return on net operating assets (Group) Associates and Joint Ventures % >20 24.6 25.4 18.4 15.9 17.0 18.7 18.0 Average net operating assets Net profit attributable to ordinary shareholders of Barloworld Limited - net exceptional Return on ordinary shareholders' funds (excluding items + B-BBEE transaction charge (net of tax) % >15 10.4 11.8 9.5 9.2 10.9 11.6 12.2 exceptional items) (Group) Average Interest of shareholders of Barloworld Limited Replacement capital expenditure Replacement capex to depreciation % 26.5 24.7 12.2 18.9 29.3 21.6 17.3 Depreciation charge Tax charge – prior year tax – non-operating and capital items tax – secondary tax Effective rate of taxation – continuing operations on companies % 28.8 29.1 23.9 27.0 37.1 34.1 31.8 Profit before tax -/(+) non-operating and capital items + goodwill impairment
* Restated for the treatment of discontinued operations. Targets 2019 2018* 2017 2016* 2015 2014 2013* PERFORMANCE PER ORDINARY SHARE Weighted average number of ordinary shares in issue during the year net of buy-back (000) 211 085 210 875 210 780 211 425 211 843 211 669 211 011 Net profit attributable to ordinary shareholders of Barloworld Limited SA cents 1 150.2 1 823.8 779.6 890.5 808.7 1 012.3 763.0 Earnings per share Weighted average number of ordinary shares in issue, net of buy-back US cents 80.4 140.2 58.2 60.4 67.5 95.8 82.2 Earnings per share – continuing operations As above, but using results from continuing results only SA cents 907.2 801.9 907.2 876.8 808.7 810.3 739.9 US cents 63.4 61.6 67.8 59.4 67.5 76.7 79.7 Net profit attributable to ordinary shareholders of Barloworld Limited + goodwill impairment -/(+) non trading profits/(losses) net of tax and non-controlling 1 192.1 883.4 838.1 813.8 882.5 820.8 Headline earnings per share interest thereof SA cents 1 100.0 Weighted average number of ordinary shares in issue, net of buy-back US cents 76.8 91.6 66.0 56.8 67.9 83.5 88.4 SA cents 867.4 910.0 974.5 840.9 925.5 856.5 779.6 Headline earnings per share – continuing operations As above, but using results from continuing results only US cents 60.6 70.0 72.8 57.0 77.3 81.0 84.0 Headline earnings per share – continuing SA cents 1 031.1 910.0 875.9 752.2 925.5 856.5 779.6 operations excluding B-BBEE and finance cost on As above, but using results from continuing results normalised^ discontinued operations US cents 72.0 70.0 65.4 51.0 77.3 81.0 84.0 SA cents 462.0 462.0 390.0 345.0 345.0 320.0 291.0 Dividends per share Interim and final dividends declared out of current year's earnings US cents 32.3 35.5 29.1 23.4 28.8 30.3 31.3 Headline earnings (continuing operations) + B-BBEE transaction charge (net Dividend cover of taxation) times 1.9 2.5 2.1 2.3 2.6 2.5 2.5 Dividends paid out of current year's earnings Interest of shareholders of Barloworld Limited, including investments at market value SA cents 11 182 10 531 9 533 8 997 9 157 7 941 7 266 Net asset value per share Number of ordinary shares in issue, net of buy-back US cents 737 744 706 654 661 703 722 ^ Headline earnings per share – continuing operations excluding B-BBEE transactions and material disposal, as per the Barloworld long term incentive scheme performance measurements. PROFITABILITY AND ASSET MANAGEMENT Operating profit before B-BBEE charge and goodwill impairment Operating margin – Group – excluding B-BBEE % >6 8.5 9.0 6.1 6.2 6.4 6.0 5.3 Revenue – group operations Operating margin – Continuing operations – Operating profit before B-BBEE charge and goodwill impairment % >6 5.9 6.3 6.6 6.6 6.4 6.2 5.6 excluding B-BBEE Revenue – continuing operations Revenue – group operations Net asset turn times >3 1.7 1.8 2.2 2.1 2.1 2.4 2.6 Average net assets Operating profit + B-BBEE transaction charge + investment income + income from % >18 16.0 17.5 13.4 13.3 13.4 15.3 14.8 Return on net assets (Group) Associates and Joint Ventures Return on net assets (Trading businesses) As per above Group calculation but excluding leasing and car rental businesses % >20 16.7 19.0 12.6 12.7 12.8 15.2 15.3 Operating profit + B-BBEE transaction charge + investment income + income from Return on net operating assets (Group) Associates and Joint Ventures % >20 24.6 25.4 18.4 15.9 17.0 18.7 18.0 Average net operating assets Net profit attributable to ordinary shareholders of Barloworld Limited - net exceptional Return on ordinary shareholders' funds (excluding items + B-BBEE transaction charge (net of tax) % >15 10.4 11.8 9.5 9.2 10.9 11.6 12.2 exceptional items) (Group) Average Interest of shareholders of Barloworld Limited Replacement capital expenditure Replacement capex to depreciation % 26.5 24.7 12.2 18.9 29.3 21.6 17.3 Depreciation charge Tax charge – prior year tax – non-operating and capital items tax – secondary tax Effective rate of taxation – continuing operations on companies % 28.8 29.1 23.9 27.0 37.1 34.1 31.8 Profit before tax -/(+) non-operating and capital items + goodwill impairment
* Restated for the treatment of discontinued operations. 138 139 Consolidated seven-year summary CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
Targets 2019 2018* 2017 2016* 2015 2014 2013* LIQUIDITY AND LEVERAGE Non-current liabilities – deferred tax liabilities + current liabilities Total liabilities to total shareholders' funds % <150 86.7 113.2 115.5 130.0 137.4 149.5 152.0 Interest of all shareholders Non-current interest-bearing liabilities + amounts due to bankers and short-term loans Net debt to total shareholders' funds - cash and cash equivalents % 2.4 14.4 27.6 40.7 55.1 40.9 47.5 Interest of all shareholders Non-current interest-bearing liabilities + amounts due to bankers and short-term loans + convertible bond Total borrowings to total shareholders' funds Interest of all shareholders – Total group % 32.7 49.1 46.4 56.1 66.9 64.7 64.0 – Trading businesses % 30 – 50 10.1 25.3 20.9 28.9 42.9 39.7 38.0 – Leasing businesses % 600 – 800 604.2 614.3 560.1 720.1 688.4 661.8 665.7 – Car rental businesses % 200 – 300 207.6 203.8 203.3 216.4 210.9 205.4 224.4 Non-current interest-bearing liabilities + amounts due to bankers and short-term loans Net borrowings/EBITDA + convertible bond – cash and cash equivalents times <2.5 0.1 0.4 0.8 1.2 1.8 1.6 1.4 Operating profit + impairment of goodwill & intangible assets + depreciation charge Current assets Current ratio >1 2.0 1.7 1.8 1.8 1.8 1.6 1.6 Current liabilities Current assets – inventories Quick ratio >0.5 1.4 1.1 1.2 1.1 0.9 0.9 0.8 Current liabilities Profit before non-operating and capital items + goodwill impairment + B-BBEE transaction charge + interest paid (including interest capitalised and interest included Interest cover – continuing operations in cost of sales) – Total group Interest paid (including interest capitalised and interest included in cost of sales) times >3 3.0 3.0 3.0 3.0 2.9 3.3 3.3 – Trading businesses times >4 3.2 3.2 3.8 3.7 3.5 4.0 4.5 – Leasing businesses times >1 2.0 1.8 1.9 2.2 2.2 – Car rental businesses times >1.25 2.1 2.0 2.0 2.3 2.3 2.4 2.0 VALUE ADDED Number of employees 15 396 17 417 19 201 20 786 19 745 19 616 19 204 Revenue Revenue per employee R000's 3 669.6 3 646.1 3 302.8 3 201.6 3 186.9 3 342.8 3 136.0 Average number of employees Total value created per value added statement Value created per employee R000's 1 054.5 1 055.5 846.2 778.0 790.1 813.6 751.1 Average number of employees Salaries, wages and other benefits paid to employees Employment cost per employee R000's 577.4 531.2 497.6 469.9 452.7 469.0 453.6 Average number of employees
* Restated for the treatment of discontinued operations. Targets 2019 2018* 2017 2016* 2015 2014 2013* LIQUIDITY AND LEVERAGE Non-current liabilities – deferred tax liabilities + current liabilities Total liabilities to total shareholders' funds % <150 86.7 113.2 115.5 130.0 137.4 149.5 152.0 Interest of all shareholders Non-current interest-bearing liabilities + amounts due to bankers and short-term loans Net debt to total shareholders' funds - cash and cash equivalents % 2.4 14.4 27.6 40.7 55.1 40.9 47.5 Interest of all shareholders Non-current interest-bearing liabilities + amounts due to bankers and short-term loans + convertible bond Total borrowings to total shareholders' funds Interest of all shareholders – Total group % 32.7 49.1 46.4 56.1 66.9 64.7 64.0 – Trading businesses % 30 – 50 10.1 25.3 20.9 28.9 42.9 39.7 38.0 – Leasing businesses % 600 – 800 604.2 614.3 560.1 720.1 688.4 661.8 665.7 – Car rental businesses % 200 – 300 207.6 203.8 203.3 216.4 210.9 205.4 224.4 Non-current interest-bearing liabilities + amounts due to bankers and short-term loans Net borrowings/EBITDA + convertible bond – cash and cash equivalents times <2.5 0.1 0.4 0.8 1.2 1.8 1.6 1.4 Operating profit + impairment of goodwill & intangible assets + depreciation charge Current assets Current ratio >1 2.0 1.7 1.8 1.8 1.8 1.6 1.6 Current liabilities Current assets – inventories Quick ratio >0.5 1.4 1.1 1.2 1.1 0.9 0.9 0.8 Current liabilities Profit before non-operating and capital items + goodwill impairment + B-BBEE transaction charge + interest paid (including interest capitalised and interest included Interest cover – continuing operations in cost of sales) – Total group Interest paid (including interest capitalised and interest included in cost of sales) times >3 3.0 3.0 3.0 3.0 2.9 3.3 3.3 – Trading businesses times >4 3.2 3.2 3.8 3.7 3.5 4.0 4.5 – Leasing businesses times >1 2.0 1.8 1.9 2.2 2.2 – Car rental businesses times >1.25 2.1 2.0 2.0 2.3 2.3 2.4 2.0 VALUE ADDED Number of employees 15 396 17 417 19 201 20 786 19 745 19 616 19 204 Revenue Revenue per employee R000's 3 669.6 3 646.1 3 302.8 3 201.6 3 186.9 3 342.8 3 136.0 Average number of employees Total value created per value added statement Value created per employee R000's 1 054.5 1 055.5 846.2 778.0 790.1 813.6 751.1 Average number of employees Salaries, wages and other benefits paid to employees Employment cost per employee R000's 577.4 531.2 497.6 469.9 452.7 469.0 453.6 Average number of employees
* Restated for the treatment of discontinued operations.
140 141 Consolidated seven-year summary CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
Targets 2019 2018* 2017 2016* 2015 2014 2013* ORDINARY SHARES PERFORMANCE – JSE Closing market prices per share – year-end (30 September) SA cents 11 560 12 317 12 451 8 327 7 540 9 250 9 538 US cents 762 870 922 606 544 819 948 – highest SA cents 11 887 18 588 13 300 9 095 10 600 11 648 10 000 – lowest SA cents 10 850 11 748 8 256 5 192 7 530 8 790 6 790 Number of shares in issue at 30 September## million 211 211 211 211 212 213 213 Volume of shares traded million 590 221 256 361 173 170 168 Value of shares traded Rm 68 044 32 233 28 562 25 822 15 941 17 552 14 213 Headline earnings per share Earnings yield % 7.5 7.4 7.8 10.1 12.3 9.3 8.6 Closing market price per share Dividends per share Dividend yield % 4.2 3.3 2.9 4.1 4.4 3.3 3.1 Closing market price per share Total shareholder return – Barloworld Limited – Annual share price (loss)/gain % (6.1) (1.1) 49.5 10.4 (18.5) (3.0) 32.7 – Total shareholder return Annual share price gain + dividend yield % (2.0) 2.2 52.4 14.5 (14.1) 0.3 35.7 Total shareholder return – JSE all share (Alsi) index – Alsi index (30 September) 54 825 55 708 55 580 51 950 50 089 49 336 44 032 – Gain/(loss) in Alsi index – year to 30 September % (1.6) 0.2 8.9 3.7 1.5 12 23.1 – Dividend yield % 4.2 3.8 3.7 2.9 3.1 2.9 2.9 – Total shareholder return % 0.02 3.3 12.6 5.7 4.6 15.0 26.0 Closing market price per share Price: Earnings ratio times 10.5 10.3 14.1 9.9 9.3 10.5 12.6 Headline earnings per share Price: Earnings ratio – JSE Alsi index 12.0 13.6 20.2 23.4 26.7 16.9 19.8 Market capitalisation at 30 September Closing market price per share x number of shares in issue at 30 September Rm 24 423 26 004 26 223 17 570 15 995 19 664 22 043 Premium over/(under) interest of shareholders of Barloworld Limited Market capitalisation – Interest of shareholders of Barloworld Limited Rm 799 3 772 5 948 (1 372) (3 431) 2 782 6 598
## The number of shares in issue excludes shares issued in the respect of the B-BBEE transaction other than to the General staff trust. Targets 2019 2018* 2017 2016* 2015 2014 2013* ORDINARY SHARES PERFORMANCE – JSE Closing market prices per share – year-end (30 September) SA cents 11 560 12 317 12 451 8 327 7 540 9 250 9 538 US cents 762 870 922 606 544 819 948 – highest SA cents 11 887 18 588 13 300 9 095 10 600 11 648 10 000 – lowest SA cents 10 850 11 748 8 256 5 192 7 530 8 790 6 790 Number of shares in issue at 30 September## million 211 211 211 211 212 213 213 Volume of shares traded million 590 221 256 361 173 170 168 Value of shares traded Rm 68 044 32 233 28 562 25 822 15 941 17 552 14 213 Headline earnings per share Earnings yield % 7.5 7.4 7.8 10.1 12.3 9.3 8.6 Closing market price per share Dividends per share Dividend yield % 4.2 3.3 2.9 4.1 4.4 3.3 3.1 Closing market price per share Total shareholder return – Barloworld Limited – Annual share price (loss)/gain % (6.1) (1.1) 49.5 10.4 (18.5) (3.0) 32.7 – Total shareholder return Annual share price gain + dividend yield % (2.0) 2.2 52.4 14.5 (14.1) 0.3 35.7 Total shareholder return – JSE all share (Alsi) index – Alsi index (30 September) 54 825 55 708 55 580 51 950 50 089 49 336 44 032 – Gain/(loss) in Alsi index – year to 30 September % (1.6) 0.2 8.9 3.7 1.5 12 23.1 – Dividend yield % 4.2 3.8 3.7 2.9 3.1 2.9 2.9 – Total shareholder return % 0.02 3.3 12.6 5.7 4.6 15.0 26.0 Closing market price per share Price: Earnings ratio times 10.5 10.3 14.1 9.9 9.3 10.5 12.6 Headline earnings per share Price: Earnings ratio – JSE Alsi index 12.0 13.6 20.2 23.4 26.7 16.9 19.8 Market capitalisation at 30 September Closing market price per share x number of shares in issue at 30 September Rm 24 423 26 004 26 223 17 570 15 995 19 664 22 043 Premium over/(under) interest of shareholders of Barloworld Limited Market capitalisation – Interest of shareholders of Barloworld Limited Rm 799 3 772 5 948 (1 372) (3 431) 2 782 6 598
## The number of shares in issue excludes shares issued in the respect of the B-BBEE transaction other than to the General staff trust.
142 143 Consolidated summary in other currencies# FOR THE YEAR ENDED 30 SEPTEMBER
US Dollar Pound Sterling Euro 2019 2018* 2019 2018* 2019 2018* $m $m £m £m €m €m INCOME STATEMENT CONTINUING OPERATIONS Revenue 3 971 4 620 3 111 3 427 3 522 3 881 Operating profit before items listed below 359 426 282 316 319 358 Impairment losses on financial assets and contract assets (9) (7) (8) Depreciation (109) (126) (85) (93) (97) (106) Amortisation of intangible assets (8) (11) (7) (8) (7) (9) Operating profit before B-BBEE transaction charge 234 289 183 215 207 243 B-BBEE transaction charge (5) (4) (5) Operating profit 229 289 179 215 202 243 Fair value adjustments on financial instruments 2 (9) 2 (7) 2 (8) Finance costs (76) (88) (59) (65) (67) (74) Income from investments 13 11 11 8 12 9 Profit before non-operating and capital items 168 203 133 150 149 170 Non-operating and capital items 6 (19) 5 (14) 5 (16) Profit before taxation 174 183 138 135 154 154 Taxation (54) (68) (43) (51) (49) (51) Profit after taxation 120 115 95 85 105 103 Income from associates and joint ventures 15 17 13 12 13 12 Net profit from continuing operations 135 132 108 99 118 115 DISCONTINUED OPERATIONS Profit from discontinued operations 36 167 28 124 32 140 Net profit 171 299 136 223 150 255 Attributable to: Owners of Barloworld Limited 170 187 133 138 150 157 Non-controlling interests in subsidiaries 1 112 3 85 – 98 Net profit 171 299 136 223 150 255 Headline earnings continuing operations 128 148 100 109 113 124 Earnings per share continuing operations (cents) 63.4 61.6 49.7 45.7 56.2 51.8 Ordinary dividends per share (cents) 32.3 35.5 25.3 26.3 28.6 29.8
* Restated for the treatment of discontinued operations. US Dollar Pound Sterling Euro 2019 2018* 2019 2018* 2019 2018* $m $m £m £m €m €m INCOME STATEMENT CONTINUING OPERATIONS Revenue 3 971 4 620 3 111 3 427 3 522 3 881 Operating profit before items listed below 359 426 282 316 319 358 Impairment losses on financial assets and contract assets (9) (7) (8) Depreciation (109) (126) (85) (93) (97) (106) Amortisation of intangible assets (8) (11) (7) (8) (7) (9) Operating profit before B-BBEE transaction charge 234 289 183 215 207 243 B-BBEE transaction charge (5) (4) (5) Operating profit 229 289 179 215 202 243 Fair value adjustments on financial instruments 2 (9) 2 (7) 2 (8) Finance costs (76) (88) (59) (65) (67) (74) Income from investments 13 11 11 8 12 9 Profit before non-operating and capital items 168 203 133 150 149 170 Non-operating and capital items 6 (19) 5 (14) 5 (16) Profit before taxation 174 183 138 135 154 154 Taxation (54) (68) (43) (51) (49) (51) Profit after taxation 120 115 95 85 105 103 Income from associates and joint ventures 15 17 13 12 13 12 Net profit from continuing operations 135 132 108 99 118 115 DISCONTINUED OPERATIONS Profit from discontinued operations 36 167 28 124 32 140 Net profit 171 299 136 223 150 255 Attributable to: Owners of Barloworld Limited 170 187 133 138 150 157 Non-controlling interests in subsidiaries 1 112 3 85 – 98 Net profit 171 299 136 223 150 255 Headline earnings continuing operations 128 148 100 109 113 124 Earnings per share continuing operations (cents) 63.4 61.6 49.7 45.7 56.2 51.8 Ordinary dividends per share (cents) 32.3 35.5 25.3 26.3 28.6 29.8
* Restated for the treatment of discontinued operations.
144 145 Consolidated summary in # other currencies CONTINUED FOR THE YEAR ENDED 30 SEPTEMBER
US Dollar Pound Sterling Euro 2019 2018* 2019 2018* 2019 2018* $m $m £m £m €m €m STATEMENT OF FINANCIAL POSITION Assets Property, plant and equipment 520 894 422 686 477 770 Goodwill and intangible assets 194 240 157 184 178 207 Investment in associates, joint ventures and other non-current assets 196 174 159 133 178 150 Deferred taxation assets 50 50 41 38 46 43 Non-current assets 960 1 358 779 1 041 879 1 170 Current assets 1 772 2 087 1 438 1 600 1 626 1 797 Assets classified as held for sale 381 35 309 27 350 30 Total assets 3 113 3 480 2 526 2 668 2 855 2 997 Equity and liabilities Capital and reserves Share capital and premium 29 31 24 24 27 27 Reserves and retained income 1 231 1 221 999 936 1 130 1 051 Non-distributable reserves – foreign currency translation 298 319 242 245 273 275 Interest of shareholders of Barloworld Limited 1 558 1 571 1 265 1 205 1 430 1 353 Non-controlling interest 18 37 15 28 16 31 Interest of all shareholders 1 576 1 608 1 280 1 233 1 446 1 384 Non-current liabilities 484 630 393 483 444 542 Deferred taxation liabilities 24 45 19 34 22 38 Non-current liabilities 460 585 374 449 422 504 Current liabilities 906 1 233 734 945 831 1 063 Liabilities directly associated with assets classified as held for sale 147 9 119 7 134 8 Total equity and liabilities 3 113 3 480 2 526 2 668 2 855 2 997 STATEMENT OF CASH FLOWS Cash inflow from operations 248 131 194 96 220 110 Dividends paid (including non-controlling interest) (74) (73) (58) (54) (66) (62) Net cash retained from operating activities 174 58 136 42 154 48 Net cash generated/(used) in investing activities (34) 145 (27) 108 (30) 122 Net cash from/(used in) from financing activities (200) 83 (156) 62 (177) 70 Net (decrease)/increase in cash and cash equivalents (60) 286 (47) 212 (53) 240 Exchange rates used: Balance sheet – closing rate (rand) 15.16 14.15 18.68 18.45 16.53 16.44 Income statement and cash flow statement – average rate (rand) 14.31 13.01 18.27 17.53 16.14 15.48
# These schedules are provided for convenience purposes only. The presentation currency used for the financial statements and notes is South African Rand. * Restated for the treatment of discontinued operation. US Dollar Pound Sterling Euro 2019 2018* 2019 2018* 2019 2018* $m $m £m £m €m €m STATEMENT OF FINANCIAL POSITION Assets Property, plant and equipment 520 894 422 686 477 770 Goodwill and intangible assets 194 240 157 184 178 207 Investment in associates, joint ventures and other non-current assets 196 174 159 133 178 150 Deferred taxation assets 50 50 41 38 46 43 Non-current assets 960 1 358 779 1 041 879 1 170 Current assets 1 772 2 087 1 438 1 600 1 626 1 797 Assets classified as held for sale 381 35 309 27 350 30 Total assets 3 113 3 480 2 526 2 668 2 855 2 997 Equity and liabilities Capital and reserves Share capital and premium 29 31 24 24 27 27 Reserves and retained income 1 231 1 221 999 936 1 130 1 051 Non-distributable reserves – foreign currency translation 298 319 242 245 273 275 Interest of shareholders of Barloworld Limited 1 558 1 571 1 265 1 205 1 430 1 353 Non-controlling interest 18 37 15 28 16 31 Interest of all shareholders 1 576 1 608 1 280 1 233 1 446 1 384 Non-current liabilities 484 630 393 483 444 542 Deferred taxation liabilities 24 45 19 34 22 38 Non-current liabilities 460 585 374 449 422 504 Current liabilities 906 1 233 734 945 831 1 063 Liabilities directly associated with assets classified as held for sale 147 9 119 7 134 8 Total equity and liabilities 3 113 3 480 2 526 2 668 2 855 2 997 STATEMENT OF CASH FLOWS Cash inflow from operations 248 131 194 96 220 110 Dividends paid (including non-controlling interest) (74) (73) (58) (54) (66) (62) Net cash retained from operating activities 174 58 136 42 154 48 Net cash generated/(used) in investing activities (34) 145 (27) 108 (30) 122 Net cash from/(used in) from financing activities (200) 83 (156) 62 (177) 70 Net (decrease)/increase in cash and cash equivalents (60) 286 (47) 212 (53) 240 Exchange rates used: Balance sheet – closing rate (rand) 15.16 14.15 18.68 18.45 16.53 16.44 Income statement and cash flow statement – average rate (rand) 14.31 13.01 18.27 17.53 16.14 15.48
# These schedules are provided for convenience purposes only. The presentation currency used for the financial statements and notes is South African Rand. * Restated for the treatment of discontinued operation.
146 147 Definitions
Below is a list of key definitions of financial ASSOCIATE CASH AND CASH EQUIVALENTS terms used in the annual report of Barloworld An entity over which the investor has Cash comprises cash on hand and demand Limited (the company) and the group: significant influence and that is neither deposits. Cash equivalents are short-term, a subsidiary nor an interest in a joint highly liquid investments that are readily ACCOUNTING POLICIES arrangement. Significant influence is the convertible to known amounts of cash and The specific principles, bases, conventions, power to participate in the financial and that are subject to an insignificant risk of rules and practices applied in preparing and operating policy decisions of the associate, changes in value. presenting financial statements. but is not control or joint control over those policies. CASH FLOW HEDGE Changes in accounting policies are accounted for in accordance with the transitional A hedge of the exposure to variability in cash AVAILABLE-FOR-SALE FINANCIAL provisions in International Financial Reporting ASSETS flows that is attributable to a particular risk Standards (IFRS). If no such guidance is given, associated with an asset, or a liability that they are applied retrospectively, unless it is Those non-derivative financial assets that could affect profit or loss or a highly probable impracticable to do so, in which case they are are designated as available for sale or are forecast transaction that could affect profit applied prospectively. not classified as loans and receivables, or loss. held-to-maturity investments or financial Changes in accounting estimates are assets at fair value through profit or loss. CASH-GENERATING UNIT recognised in profit or loss. BORROWING COSTS The smallest identifiable group of assets Prior period errors are retrospectively restated that generates cash inflows that are largely unless it is impracticable to do so, in which Interest and other costs incurred in connection independent of the cash inflows from other case they are corrected prospectively. with the borrowing of funds. assets or groups of assets.
ACCRUAL ACCOUNTING BUSINESS COMBINATION CASH-SETTLED SHARE-BASED PAYMENT TRANSACTION The effects of transactions and other events A business is an integrated set of activities are recognised when they occur rather than and assets conducted and managed for the A share-based payment transaction in which when the cash is received or paid. purpose of providing a return to investors or the entity acquires goods or services by lower costs or other economic benefits directly incurring a liability to transfer cash or other ACTUARIAL GAINS AND LOSSES and proportionately to participants. assets to the supplier of those goods or services for amounts that are based on the The effect of differences between the A business combination is the bringing price (or value) of the entity’s shares or other previous actuarial assumptions and what together of separate entities or businesses into equity instruments of the entity. has actually occurred, as well as changes in one reporting entity. actuarial assumptions. CHANGE IN ACCOUNTING ESTIMATE CAPITAL CHARGE AMORTISED COST An adjustment of the carrying amount of Average invested capital multiplied by the an asset or a liability, or the amount of the The amount at which a financial asset weighted average cost of capital. or financial liability is measured at initial periodic consumption of an asset, that results from the assessment of the present status of, recognition, minus principal repayments, CARRYING AMOUNT plus or minus the cumulative amortisation and expected future benefits and obligations The amount at which an asset is recognised using the effective interest method of any associated with, assets and liabilities. Changes after deducting any accumulated depreciation difference between the initial amount and the in accounting estimates result from new or amortisation and accumulated maturity amount, and minus any reduction for information or new developments and, impairment losses. impairment or non-collectability. accordingly, are not corrections of errors.
ASSET
A resource controlled by the entity as a result of a past event from which future economic benefits are expected to flow. CHIEF OPERATING DECISION-MAKER CONTRACT CREDIT LOSS (KEY MANAGEMENT) An agreement between two or more The difference between all contractual cash Those persons having authority and parties that creates enforceable rights flows that are due to the group in accordance responsibility for planning, directing and and obligations. with the contract and all the cash flows controlling the activities of the entity. that the group expects to receive (ie all cash CONTRACT ASSET In terms of this definition, the executive shortfalls), discounted at the original effective interest rate (or credit-adjusted effective committee of Barloworld Limited The group’s right to consideration in exchange interest rate for purchased or originated have been identified as the chief for goods or services that the group has credit-impaired financial assets). operating decision-maker. transferred to a customer when that right is conditioned on something other than the CUSTOMER CONSTRUCTIVE OBLIGATION passage of time (for example, the Group’s An obligation that derives from an established future performance). A party that has contracted with the group to pattern of past practice, published policies obtain goods or services that are an output CONTRACT LIABILITY or a sufficiently specific current statement, in of the group’s ordinary activities in exchange for consideration. which the entity has indicated to other parties The group’s obligation to transfer goods or that it will accept certain responsibilities and services to a customer for which the group DATE OF TRANSACTION as a result, the entity has created a valid has received consideration (or the amount is expectation on the part of those other parties due) from the customer The date on which the transaction first that it will discharge those responsibilities. qualifies for recognition in accordance with COST OF SALES International Financial Reporting Standards. CONSOLIDATED FINANCIAL When inventories are sold, the carrying STATEMENTS DEPRECIATION (OR AMORTISATION) amount is recognised as part of cost of The financial statements of a group presented sales. Any write-down of inventories to net The systematic allocation of the depreciable as those of a single economic entity. realisable value and all losses of inventories or amount of an asset over its useful life. reversals of previous write-downs or losses are The depreciable amount of an asset is the cost CONTINGENT ASSET recognised in cost of sales in the period the of an asset, or other amount substituted for A possible asset that arises from past events write-down, loss or reversal occurs. cost, less its residual value. and whose existence will be confirmed only by the occurrence or non-occurrence of one COSTS TO SELL DERECOGNITION or more uncertain future events not wholly The incremental costs directly attributable The removal of a previously recognised within the control of the entity. to the disposal of an asset (or disposal asset or liability from the statement of group), excluding finance costs and income financial position. CONTINGENT LIABILITY tax expense. A possible obligation that arises from past DERIVATIVE CREDIT-IMPAIRED FINANCIAL ASSET events and whose existence will be confirmed A financial instrument whose value changes only by the occurrence or non-occurrence A financial asset is credit-impaired when one in response to an underlying item, requires of one or more uncertain future events not or more events that have a detrimental impact no initial or little net investment in relation wholly within the control of the entity, or on the estimated future cash flows of that to other types of contracts that would be a present obligation that arises from past financial asset have occurred. expected to have a similar response to events but is not recognised because it is changes in market factors and is settled at a not probable that an outflow of resources future date. embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.
148 149 Definitions CONTINUED
DEVELOPMENT ECONOMIC PROFIT EQUITY METHOD
The application of research findings or The measure of the difference between the A method in which the investment is initially other knowledge to a plan or design for the accounting profit of a business (Net Operating recognised at cost and adjusted thereafter for production of new or substantially improved Profit after Tax) and the cost of capital the post-acquisition change in the share of net materials, devices, products, processes, invested in the business (referred to as a assets of the investee. Profit or loss includes systems or services before starting commercial “Capital Charge”). the share of the profit or loss of the investee. production or use. EFFECTIVE INTEREST METHOD EQUITY-SETTLED SHARE-BASED DILUTED EARNINGS PER SHARE PAYMENT TRANSACTION The method that is used in the calculation Profit or loss attributable to ordinary equity of the amortised cost of a financial asset A share-based payment transaction in which holders of the parent entity divided by or a financial liability and in the allocation the entity receives goods or services as the weighted average number of ordinary and recognition of the interest revenue or consideration for equity instruments of the shares outstanding during the period, both interest expense in profit or loss over the entity (including shares or share options). adjusted for the effects of all dilutive potential relevant period. ordinary shares. NON-OPERATING AND CAPITAL ITEMS EMPLOYEE BENEFITS DILUTION Non-operating and capital items cover those All forms of consideration (excluding share amounts, which are not considered to be of A reduction in earnings per share or an options granted to employees) given in an operating/trading nature, and generally increase in loss per share resulting from the exchange for services rendered by employees. include re-measurements due to: assumption that convertible instruments are converted, that options or warrants are EVENTS AFTER THE REPORTING °° impairments of goodwill and exercised, or that ordinary shares are issued PERIOD (POST-BALANCE SHEET) non-current assets; upon the satisfaction of specified conditions. Recognised amounts in the financial °° gains and losses on the measurement statements are adjusted to reflect events to fair value less costs to sell (or on the DISCONTINUED OPERATION arising after the financial position date that disposal) of assets or disposal groups A component that has either been disposed provide evidence of conditions that existed constituting discontinued operations; at the financial position date. Events after of or is classified as held for sale and °° gains and losses on the measurement to represents a separate major line of business the financial position date that are indicative fair value less costs to sell of non-current or geographical area of operation, or is of conditions that arose after the financial assets or disposal groups classified as held part of a single coordinated plan to dispose position date are dealt with by way of a note. for sale; of a separate major line of business or gains and losses on the disposal of EQUITY °° geographical area of operation, or a subsidiary fixed property; acquired exclusively with a view to resale. Debt and equity instruments are classified as °° recycling through profit or loss of foreign The results of discontinued operations are either financial liabilities or as equity based on currency translation reserves upon presented separately in the income statement the substance of the contractual arrangement. disposal of entities whose functional and the assets and liabilities associated with currencies are different to the group’s these operations are shown as Held for Sale in Equity instruments issued by the group are presentation currency; the statement of financial position. recorded at the proceeds received, net of direct issue costs. °° recycling through profit or loss of fair value EBITDA gains and losses previously recognised in EQUITY INSTRUMENT other comprehensive income upon the EBITDA refers to Earnings before interest, disposal of available-for-sale financial taxes, depreciation and amortisation. A contract or certificate that evidences a residual interest in the total assets after assets and realisation of hedges of a net deducting the total liabilities. investment in a foreign operation; and °° the group’s proportionate share of non-operating and capital items (determined on the same basis) of associates and joint arrangements. Re-measurements to fair value of other exchange financial assets or financial liabilities GOING CONCERN BASIS financial instruments (including amounts with another entity under conditions that are The assumption that the entity will continue in recycled through profit or loss under cash flow potentially favourable to the entity. operation for the foreseeable future. hedges that were previously recognised in FINANCIAL GUARANTEE CONTRACT other comprehensive income) are not included GROSS INVESTMENT IN LEASE in non-operating and capital items. A contract that requires the group to make The aggregate of the minimum lease specified payments to reimburse the holder for EXPENSES payments receivable by the lessor under a a loss it incurs because a specified debtor fails finance lease and any unguaranteed residual The decreases in economic benefits in the to make payment when due in accordance value accruing to the lessor. form of outflows or depletions of assets with the original or modified terms of a or incurrences of liabilities that result in debt instrument. HEDGED ITEM decreases in equity, other than those relating to distributions to equity participants. FINANCIAL INSTRUMENT An asset, liability, firm commitment, highly probable forecast transaction or net A contract that gives rise to a financial asset FAIR VALUE investment in a foreign operation that exposes of one entity and a financial liability or equity the entity to risk of changes in fair value The price that would be received to sell an instrument of another entity. or future cash flows and is designated as asset or paid to transfer a liability in an orderly being hedged. transaction between market participants at FINANCIAL LIABILITIES the measurement date. A financial liability is a liability that is a HEDGING INSTRUMENT contractual obligation to deliver cash or FAIR VALUE HEDGE A designated derivative or non-derivative another financial asset to another entity or to financial asset or non-derivative financial A hedge of exposure to changes in fair exchange financial assets or financial liabilities liability whose fair value or cash flows are value of a recognised asset, liability or with another entity under conditions that are expected to offset changes in the fair value or firm commitment. potentially unfavourable to the entity. cash flows of a designated hedged item.
FINANCE LEASE FINANCIAL RISK HEDGE EFFECTIVENESS A lease that transfers substantially all the The risk of a possible future change in one The degree to which changes in the fair risks and rewards incidental to ownership or more of a specified interest rate, financial value or cash flows of the hedged item that of an asset. Title may or may not eventually instrument price, commodity price, foreign is attributable to a hedged risk are offset by be transferred. exchange rate, index of prices or rates, changes in the fair value or cash flows of the credit rating or credit index or other variable, hedging instrument. FINANCIAL ASSET OR LIABILITY AT provided in the case of a non-financial variable FAIR VALUE THROUGH PROFIT OR that the variable is not specific to a party to LOSS HELD FOR TRADING FINANCIAL the contract. ASSET OR FINANCIAL LIABILITY A financial asset or financial liability that is classified as held for trading or is designated FIRM COMMITMENT One that is acquired or incurred principally for as such on initial recognition other than the purpose of selling or repurchasing it in the A binding agreement for the exchange of a investments in equity instruments that do near term or as part of a portfolio of identified specified quantity of resources at a specified not have a quoted market price in an active financial instruments that are managed price on a specified future date or dates. market and whose fair value cannot be together and for which there is evidence of a recent actual pattern of short-term reliably measured. FORECAST TRANSACTION profit-taking or a derivative (except for a FINANCIAL ASSETS An uncommitted but anticipated derivative that is a designated and effective future transaction. hedging instrument). A financial asset is an asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity, or to
150 151 Definitions CONTINUED
IMMATERIAL INSURER which is expected to result in an outflow from the entity of resources embodying If individually or collectively it would not The party that has an obligation under economic benefits. influence the economic decisions of the users an insurance contract to compensate a of the financial statements. policyholder if an insured event occurs. LOANS AND RECEIVABLES
IMPAIRMENT LOSS OF NON- INVESTED CAPITAL Non-derivative financial assets with fixed or FINANCIAL ASSETS determinable payments that are not quoted in The measure of the sum of the total interest an active market. The amount by which the carrying amount of of all shareholders (including non-controlling an asset or a cash-generating unit exceeds its interests), interest bearing long-term LOSS ALLOWANCE recoverable amount. loans, bank overdrafts and interest bearing short-term loans less cash. The allowance for expected credit losses on IMPAIRMENT GAIN OR LOSS financial assets measured at amortised cost, Gain or loss that are recognised in profit or JOINT ARRANGEMENT lease receivables and contract assets, and financial guarantee contracts. loss when a financial asset’s credit quality has An arrangement in which two or more parties deteriorated/improved and an expected credit have joint control. MARKET CONDITION loss/gain is recognised. JOINT CONTROL A condition upon which the exercise IMPRACTICABLE price, vesting or exercisability of an equity The contractually agreed sharing of control instrument depends on and is related to the Applying a requirement is impracticable when which exists only when decisions about market price of the entity’s equity instruments, the entity cannot apply it after making every relevant activities require unanimous consent such as attaining a specified share price or reasonable effort to do so. of the parties sharing control. a specified amount of intrinsic value of a
INCOME JOINT OPERATION share option, or achieving a specified target that is based on the market price of the Increase in economic benefits in the form A joint arrangement whereby the parties that entity’s equity instruments relative to an index of inflows or enhancements of assets or have joint control of the arrangement have of market prices of equity instruments of decreases of liabilities that result in increases rights to the assets, and obligations for the other entities. in equity, other than those relating to liabilities relating to the arrangement. contributions from equity participants. MINIMUM LEASE PAYMENTS JOINT VENTURE INSURANCE ASSET Payments over the lease term that the lessee A joint arrangement whereby the parties that is or can be required to make, excluding An insurer’s net contractual rights under an have joint control of the arrangement have contingent rent, costs for services and taxes insurance contract. rights to the net assets of the arrangement. to be paid by and reimbursed to the lessor including in the case of a lessee, any amounts INSURANCE LIABILITY LEGAL OBLIGATION guaranteed by the lessee or by a party related An insurer’s net contractual obligations under An obligation that derives from a contract, to the lessee or in the case of a lessor, any an insurance contract. legislation or other operation of law. residual value guaranteed to the lessor by the lessee, a party related to the lessee or a third INSURANCE RISK LIFETIME EXPECTED CREDIT LOSSES party unrelated to the lessor that is financially capable of discharging the obligations under Risk, other than financial risk, transferred from The expected credit losses that result from all the guarantee. the holder of a contract to the issuer. possible default events over the expected life of a financial instrument. NET ASSETS INSURED EVENT Net operating assets plus goodwill, cash and An uncertain future event that is covered LIABILITY cash equivalents. by an insurance contract and creates A present obligation of the entity arising insurance risk. from a past event, the settlement of NET DEBT in Johannesburg and treasury in the POST-EMPLOYMENT BENEFITS United Kingdom. Gross debt (long and short term) less net cash. Employee benefits (other than termination °° Segment accounting policies are consistent benefits) that are payable after the completion NET INVESTMENT IN THE LEASE with those adopted for the preparation of of employment. the group financial statements. The gross investment in the lease discounted POST-EMPLOYMENT BENEFIT PLANS at the interest rate implicit in the lease. °° The executive committee evaluates the segment performance based on the Formal or informal arrangements under NET OPERATING ASSETS operating results plus any other items which an entity provides post-employment that are directly attributable to segments benefits to employees. Defined contribution Segment assets less segment liabilities. including fair value adjustments on benefit plans are where there are no legal financial instruments. Interest costs are NON-CONTROLLING INTEREST or constructive obligations to pay further excluded due to the centralised nature contributions if the fund does not hold The equity in a subsidiary not attributable, of the group’s treasury operations. sufficient assets to pay all employee benefits directly or indirectly, to a parent. All intra-segment transactions are relating to employee service in the current eliminated on consolidation. and prior periods. Defined benefit plans are OPERATING LEASE post-employment benefit plans other than OWNER-OCCUPIED PROPERTY A lease other than a finance lease. defined contribution plans. Property held by the owner or by the OPERATING SEGMENTS lessee under a finance lease for use in the PRESENTATION CURRENCY production or supply of goods or services or The Executive Committee has determined The currency in which the financial statements for administrative purposes. the operating segments based on the are presented. information it uses to allocate resources and PAST SERVICE COST assess segmental performance. Segments PRESENT VALUE are analysed by operating activities and The increase or decrease in the present A current estimate of the present discounted geographical regions. The activities of value of the defined benefit obligation for value of the future net cash flows in the the Group’s operating segments are employee service in prior periods resulting normal course of business. described below: from the introduction of, or changes to, post-employment benefits or other long-term °° The equipment segment provides PRIOR PERIOD ERROR customers with integrated solutions that employee benefits. An omission from or misstatement in the include Caterpillar earthmoving equipment, PERFORMANCE OBLIGATION financial statements for one or more prior engines and other complementary brands. periods arising from a failure to use, or A promise in a contract with a customer to °° The automotive segment provides misuse of, reliable information that was customers with integrated motor vehicle transfer to the customer either: available when financial statements for those usage solutions through the operation of a) a good or service (or a bundle of goods or periods were authorised for issue and could car rental, motor retail and fleet services. services) that is distinct; or reasonably be expected to have been obtained °° The logistics segment provides customers and taken into account in the preparation of b) a series of distinct goods or services with traditional logistics services and supply those financial statements. that are substantially the same and that chain management solutions. have the same pattern of transfer to PROJECTED UNIT CREDIT METHOD °° The handling segment provides customers the customer. with innovative solutions for material An actuarial valuation method that sees each handling needs including lift trucks, POLICYHOLDER period of service as giving rise to an additional warehouse handling equipment and unit of benefit entitlement and measures each distribution of agricultural equipment. A party that has a right to compensation unit separately to build up the final obligation. under an insurance contract if an insured The corporate segment comprises all °° event occurs. the other group activities including the operations of the corporate office
152 153 Definitions CONTINUED
PROSPECTIVE APPLICATION RESEARCH REVENUE
Applying a new accounting policy to The original and planned investigation Revenue represents the gross inflow of transactions, other events and conditions undertaken with the prospect of gaining economic benefits during the period arising occurring after the date the policy changed new scientific or technical knowledge in the course of the ordinary activities when or recognising the effect of the change in and understanding. those inflows result in increases in equity, an accounting estimate in the current and other than increases relating to contributions future periods. RESIDUAL VALUE from equity participants. The estimated amount which an entity RECOGNITION OF ASSETS AND SEGMENT ASSETS LIABILITIES would currently obtain from disposal of the asset, after deducting the estimated costs of Total assets less goodwill, cash on hand, Assets are only recognised if they meet the disposal, if the asset was already of the age deferred and current taxation assets. definition of an asset, it is probable that future and in the condition expected at the end of its economic benefits associated with the asset useful life. SEGMENT LIABILITIES will flow to the group and the amount at Non-interest-bearing current and non-current which the settlement would take place or fair RESTRUCTURING liabilities, excluding deferred and current value can be measured reliably. A programme that is planned and controlled taxation liabilities. Liabilities are only recognised if they meet by management, and materially changes the definition of a liability, it is probable that either the scope of a business undertaken by SEGMENT RESULT future economic benefits associated with the an entity or the manner in which that business Segment result represents operating profit liability will flow from the group and the cost is conducted. plus any other items that are directly or fair value can be measured reliably. attributable to segments including fair value RETROSPECTIVE APPLICATION Financial instruments are recognised when adjustments on financial instruments. Interest the entity becomes a party to the contractual Applying a new accounting policy to costs are excluded due to the centralised provisions of the instrument. Financial assets transactions, other events and conditions, as if nature of the group’s treasury operations. and liabilities as a result of firm commitments that policy had always been applied. are only recognised when one of the parties SHARE-BASED PAYMENT TRANSACTIONS has performed under the contract. RETROSPECTIVE RESTATEMENT A cash-settled share-based payment Regular way purchases and sales are Correcting the recognition, measurement and transaction is the acquisition of goods or recognised using trade date accounting. disclosure of amounts as if a prior period error had never occurred. services by incurring a liability to transfer cash RECOVERABLE AMOUNT or other assets to the supplier of those goods RETURN ON INVESTED CAPITAL or services for amounts that are based on the The higher of an asset’s or cash-generating (ROIC) price (or value) of the entity’s shares or other unit’s fair value less cost to sell and its value equity instruments. The return on investment capital is a in use. profitability ratio. It measures the percentage An equity-settled share-based payment REGULAR WAY PURCHASE OR SALE return that a company makes over its invested transaction is a transaction where goods or capital by calculating net operating profit services are received and settled in equity A purchase or sale of a financial asset under after tax over total equity, plus long- and instruments of the entity (including shares or a contract, the terms of which require short-term loans, bank overdrafts and cash share options). delivery of the asset within the timeframe on hand. established by regulation or convention in the TAX BASE marketplace concerned. The tax base of an asset is the amount that is deductible for tax purposes if the economic benefits from the asset are taxable or is the carrying amount of the asset if the economic benefits are not taxable. The tax base of a liability is the carrying VALUE IN USE amount of the liability less the amount The present value of the future cash flows deductible in respect of that liability in expected to be derived from an asset or future periods. cash-generating unit. The tax base of revenue received in advance is the carrying amount less any amount VEST of the revenue that will not be taxed in To become an entitlement. Under a future periods. share-based payment arrangement, a counterparty’s rights to receive cash, other TEMPORARY DIFFERENCES assets or equity instruments of the entity vests The differences between the carrying amount when the counterparty’s entitlement is no of an asset or liability and its tax base. longer conditional on the satisfaction of any vesting conditions. TRANSACTION COSTS VESTING CONDITIONS Incremental costs that are directly attributable to the acquisition, issue or disposal of a The conditions that determine whether the financial asset or financial liability, i.e. those entity receives the services that entitle the that would not have been incurred if the counterparty to receive cash, other assets entity had not acquired, issued or disposed of or equity instruments of the entity, under a the financial instrument. share-based payment arrangement. Vesting conditions are either service conditions or TRANSACTION PRICE (FOR A performance conditions. Service conditions CONTRACT WITH A CUSTOMER) require the counterparty to complete a The amount of consideration to which the specified period of service. Performance group expects to be entitled in exchange for conditions require the counterparty to transferring promised goods or services to a complete a specified period of service and customer, excluding amounts collected on specified performance targets to be met behalf of third parties. (such as a specified increase in the entity’s profit over a specified period of time). TREASURY SHARES A performance condition might include a market condition. The group’s own equity instruments, held by the entity or other members of the VESTING PERIOD consolidated group. The period during which all the specified UNEARNED FINANCE INCOME vesting conditions of a share-based payment arrangement are to be satisfied. The difference between the gross investment in the lease and the net investment in the lease.
USEFUL LIFE
The period over which an asset is expected to be available for use or the number of production or similar units expected to be obtained from the asset.
154 155 Notes Corporate information
BARLOWORLD LIMITED TRANSFER SECRETARIES – NAMIBIA BOARD OF DIRECTORS (Registration number 1918/000095/06) Transfer Secretaries (Proprietary) Adv DB Ntsebeza SC (Chairman) JSE codes: BAW and BAWP Limited (Registration number 93/713) NP Dongwana ISIN codes: ZAE000026639 and Shop 8, Kaiser Krone Centre, ZAE000026647 Post Street Mall, Windhoek, Namibia FNO Edozien* (PO Box 2401, Windhoek, Namibia) HH Hickey Tel +264 61 227 647
REGISTERED OFFICE AND BUSINESS MD Lynch-Bell** ADDRESS NP Mnxasana Barloworld Limited, 61 Katherine Street, ENQUIRIES SS Ntsaluba Sandton, 2196 Zanele Salman PO Box 782248, Sandton, 2146, Head: Group Investor Relations P Schmid South Africa Tel +27 11 445 1000 HN Molotsi Tel +27 11 445 1000 E-mail [email protected] Email [email protected] (For background information visit NV Mokhesi www.barloworld.com) DM Sewela
TRANSFER SECRETARIES – NV Lila SOUTH AFRICA * Nigerian Link Market Services South Africa ** British Proprietary Limited (Registration number 2000/007239/07), 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, Johannesburg, 2001 COMPANY SECRETARY (PO Box 4844, Johannesburg, 2000) A Ndoni Tel +27 11 630 0000
REGISTRARS – UNITED KINGDOM Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, England Tel +44 190 383 3381 www.barloworld.com