Integrated annual report 2011 Welcome to Barloworld Barloworld is a multinational industrial corporation with annual revenues of approximately R50 billion. A common strategic approach guides our operations in meeting exacting performance standards to create sustainable value for all stakeholders. What we do Barloworld offers its global customer base flexible, value-adding, integrated business solutions backed by leading international brands through its core divisions: > Equipment – earthmoving and power systems > Automotive and Logistics – car rental, motor retail, fleet services, used vehicles and disposal solutions and logistics management and supply chain optimisation > Handling – forklift truck distribution, agriculture equipment and SEM. The brands we represent on behalf of our principals include Caterpillar, Hyster, Avis, Audi, BMW, Ford, General Motors, Mercedes-Benz, Toyota and Volkswagen. How we do business ‘the Barloworld way’ Barloworld has a proven track record of long-term relationships with global principals and customers. Equally we have proven our ability to develop businesses in multiple geographies, including challenging territories with high-growth prospects. One of our core skills is an ability to leverage systems and best practices across our chosen business segments. As an organisation, we are committed to sustainable development, empowerment and transformation, and the highest standards of corporate governance. Our business is underpinned by the values of integrity, excellence, teamwork and commitment. In everything that we do we obey the law, respect others, are fair, honest and we protect the environment. www.barloworld.com Report scope and boundary Complementing the disclosures in this report are responses to the GRI sustainability reporting This integrated annual report covers the activities of the guidelines G3.1, available at www.barloworld.com. Barloworld group, including all subsidiaries, associates and joint ventures for the financial year ended 30 September 2011, and follows the report published in December Sustainable development 2010. Our approach to sustainability reflects our fundamental In addition to International Financial Reporting Standards intent to prosper as a business and to facilitate human (IFRS), and the King report on corporate governance in potential by connecting present and future generations. South Africa (King III), Barloworld uses the Global We strive to achieve this objective by providing solutions to Reporting Initiative (G3.1) as the framework for reporting, stakeholder requirements in a balanced and responsible in conjunction with the discussion paper released by the manner. Integrated Reporting Committee of South Africa. Where relevant, the outcomes of stakeholder engagement Our sustainable development goal is to meet the needs of processes are used as reference points. the present without compromising the ability of future generations to meet their own needs. While this cannot be The consolidated data incorporate the company and all achieved by one organisation, we believe Barloworld can entities controlled by Barloworld as a single economic make an important contribution to the ongoing global entity. Associates and joint ventures are equity transition to sustainability and a low-carbon future. accounted. Boundaries for all data collection are consistent with our financial reporting, thus aligning Disclosure financial, environmental and social reporting. Data are collected at operational level and consolidated at Barloworld aims to achieve the highest standards of divisional and group levels. Comparable performance disclosure to provide meaningful, accurate and balanced data and information are provided on all material aspects information to stakeholders. of the group and its value-creation activities without specific limitations. Where required, historical data is Governance restated and explained. The board of directors is the custodian of corporate In addition to statutory and King III requirements, governance and strives to ensure that the group Barloworld reports on aspects of the group’s activities operates according to applicable local and international that are of interest or concern to a broad grouping of codes, rules, practices, standards and trends of good stakeholders and which provide a balanced and reasonable corporate governance. perspective of its activities. These aspects are integrated into the ongoing management of our business and reported to Assurance stakeholders annually. The financial statements in this report have been prepared Significant changes from the 2010 report include the in accordance with International Financial Reporting integration of the Logistics division into the Automotive Standards (IFRS) and independently assured by Deloitte & division and the consolidation of Equipment Russia. Touche who also assured key non-financial indicators. We expect to incrementally increase the scope of this While the precise nature of an integrated report is assurance as we develop our integrated reporting evolving, our integrated annual report covers the standards. material economic, social and environmental aspects of the group, and their consequences for stakeholders in Feedback the review period. It addresses the governance context within which the group operates, its risks and strategic We would value your feedback to ensure that we report framework for creating value. on issues that matter to you – our stakeholders. Please go to the web link: www.barloworld.com to download Our progress to date is augmented by a forward-looking or print our feedback form or email us at perspective on goals and value-creation strategies. This [email protected]. integrated presentation reflects operational responsibility and accountability for sustainable value creation and highlights stakeholder interdependence. Barloworld Limited (Company registration number 1918/000095/06) 180 Katherine Street, Sandton, South Africa PO Box 782248, Code 2146 Tel: +27 11 445 1000 STATEMENT OF THE BOARD OF DIRECTORS OF BARLOWORLD LIMITED The board of directors acknowledges its responsibility to ensure the integrity of the integrated annual report. The board believes this report addresses all material issues and presents fairly the integrated performance of the group. The integrated annual report has been prepared in line with best practice set out in the King III code. SIGNED BY Dumisa Ntsebeza Clive Thomson Don Wilson Chairman Chief executive Finance director 14 November 2011 WHO HAVE BEEN DULY AUTHORISED BY THE BOARD Directors: Non-executive: DB Ntsebeza (Chairman), SAM Baqwa, AGK Hamilton*, SS Mkhabela, MJN Njeke, SS Ntsaluba, TH Nyasulu, SB Pfeiffer#, G Rodriguez de Castro Garcia de los Rios†, Executive: CB Thomson (Chief executive), DG Wilson (Finance director), PJ Blackbeard, PJ Bulterman, M Laubscher, OI Shongwe, *British #American †Spanish Company secretary: B Ngwenya ? ? ? Contents 1 About Barloworld Report scope and boundary Flap Salient features 2 Financial and non-financial indicators 3 Business operations 4 Where we operate 6 Investment proposition 8 Chief Executive’s review on page 14 Leadership perspectives 9 “Trading results were ahead of expectation and Chairman’s letter to stakeholders 10 Chief Executive’s review 14 the group delivered a strong performance for the Operational performance 19 2011 financial year. Good growth in the mining Equipment 20 Automotive and Logistics 36 sector, together with some major contract awards, Handling 46 led to significantly higher profits in Equipment Corporate 54 Integrated stakeholder value southern Africa and Russia. Automotive and creation 56 Logistics produced a pleasing performance in a Group vision and strategy 58 Risk management 62 competitive trading environment, while the Stakeholder engagement 66 Responsible value chain 70 Handling division showed a substantial Limiting our environmental footprint 75 turnaround from the prior year. Equality, empowerment and transformation 85 Role in communities 88 We expect to maintain the positive momentum Our people 92 Value created and distributed 101 into the new financial year. While commodity Independent auditors’ report – non-financial 102 prices are off their highs, they are anticipated to Corporate governance 103 remain favourable for mining investment and Board of directors 104 production. This will benefit trading in the first Corporate governance report 106 Shareholder profile 122 half of 2012, while growth in the second half Remuneration report 124 will be slower due to the higher base. Overall we Annual financial statements 135 Finance director’s review 136 expect to make solid progress in the year ahead.” Director’s responsibility and approval 140 Preparer of annual financial statements 140 Clive Thomson, CEO Barloworld Independent auditors’ report 141 Certificate by secretary 141 Audit committee report 142 Directors’ report 144 Accounting policies 146 Annual financial statements 156 Global reporting initiative (GRI G3.1) index 246 Shareholder information 252 Letter from chairman 252 Question form for annual general meeting 253 Shareholders’ diary and map 254 Notice of annual general meeting 255 Form of proxy 263 Notes to proxy 264 Corporate information IBC Barloworld Limited integrated annual report 2011 2 Salient features Revenue up 22% to R49 823 million Operating profit up 51% to R2 289 million HEPS from continuing operations up 120% to 465 cents Strong cash generation from operations R3 104 million Net debt to equity improves to 36% from 47% Total dividend