Barloworld : Interim results for the six months to 31 March 2016

Revenue for the interim period increased to R31.9 billion (2015: R30.7 billion). Operating profit rose to R1.8 billion (2015: R1.7 billion), net profit attributable to owners of Barloworld came in at R781 million (2015: R749 million), while headline earnings per share decreased to 335 cents per share (2015: 366.8 cents per share).

Dividend
An interim dividend of 115 cents per share (2015: 115 cents per share) has been declared.

Outlook
While the current order book for Equipment southern Africa is down on September 2015 there are selected mining project opportunities in the pipeline which could boost revenues in our 2017 and 2018 financial years. The recent pick up in commodity prices has to some extent improved the outlook for marginal mines and has reduced the risk of production curtailment with the related negative impact on aftermarket demand.

The improved demand for construction equipment is expected to continue for the balance of the year. We will continue driving our operational transformation to reduce the recurring cost base. Our focus on reducing working capital and improving cash generation remains key to our future growth plans. The performance of our associate in the DRC is expected to improve in the second half once our restructure is completed and open pit mining operations resume at the Glencore Katanga mine.

In Russia we expect a traditionally stronger second half underpinned by a healthy firm order book and strong after sales demand. The Norilsk Bystrinsky greenfield mining project in eastern Siberia would appear to be moving ahead with the tender process already underway and, if successful, deliveries are likely to commence in our 2017 financial year. Spain continues to show the strongest recovery of the euro zoneÆs four largest economies and looks on track for GDP growth of around 2.6% this year. It is likely that the fresh Spanish elections called at the end of June should ensure a clearer political outcome and revitalise economic leadership in the country. While activity levels are subdued in the large construction sector we remain confident that our current cost structure will ensure that Iberia remains profitable for the balance of this year.

Handling activity levels are largely dependent on drought recovery in southern Africa. Current maize prices in South Africa, a leading indicator for tractor demand, remain high which should bode well for some improvement in trading in the coming months and drive down existing inventory levels. In Car Rental we expect volume and rate increases to drive top line revenue growth with the Budget brand continuing to achieve market share gains. Current new vehicle inflation should support increased used vehicle demand and margins.

The outlook for new vehicle sales in South Africa remains weak and we anticipate a double digit decline in this market in the 2016 calendar year. Motor Retail will continue to focus on increasing after sales and used vehicle activity levels. In addition we expect the recent dealership acquisitions to contribute positively to improving overall profitability for the balance of the year. Avis Fleet is awaiting the outcome of a number of tender submissions which together with continued organic growth should ensure that we maintain our current market leadership position and sustain our performance in the second half. LogisticsÆ activity levels are forecast to improve in the traditionally stronger second half. In Supply Chain Management and Barloworld Transport we expect both new contracts as well as recent acquisitions to enhance profitability.

While trading conditions remain challenging in certain of our businesses, the industry and geographic diversity of the groupÆs operations is providing some resilience through the cycle. A number of strategic and operational steps continue to be taken to enhance financial returns and ensure our businesses are well positioned to capitalise on growth opportunities as the cycle turns.

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