Barloworld : trading update

The groupÆs geographic and industry diversity contributed to a stable overall performance despite difficult trading conditions in the first quarter of the 2016 financial year.

Equipment and Handling
Equipment Southern Africa has traded below the prior year in the first quarter due to continued weakness in commodity markets. Reductions in capital expenditure and production cutbacks are negatively affecting equipment demand from mining companies and contract miners. Trading in Angola has also slowed due to the declining oil price and currency devaluations. Aftermarket activity remains resilient, somewhat mitigating the impact of declining machine sales.

The firm order book for southern Africa at the end of December was down on September last year. While equipment demand is expected to remain muted over the balance of the financial year we expect to experience ongoing demand for major components used in equipment overhauls as the life span of machinery is extended beyond the traditional replacement cycle.

In December a major customer in the Democratic Republic of Congo informed their business partners of a temporary suspension of mining activity which will materially impact our income from associates in the first half of the financial year.

In Equipment Russia trading in the first quarter is ahead of the prior period due to higher mining equipment and aftermarket deliveries. Notwithstanding commodity price weakness and the continuing economic recession the firm order book at the end of December is up on September as a result of new contract awards. This should support trading levels over the coming months.

The Spanish economy has continued its recovery and the trading profitability of the Iberian business in the first quarter was ahead of the prior period. The December firm order book is in line with September levels and the overall economic outlook remains broadly positive notwithstanding some uncertainty created by the recent election result. In the Handling division the agriculture businesses in southern Africa remains under pressure mainly due to the prevailing drought conditions.

Automotive and Logistics
The Automotive division produced a steady overall result in the first quarter, demonstrating the resilience of the integrated vehicle usage business model.

Car rental has seen an improved performance through growth in both rental days and rate per day. Motor Retail has been impacted by declining industry vehicle sales, however used vehicle and parts revenues have shown continued growth. Avis Fleet is trading slightly down following the non-renewal of a fleet contract at the end of the prior year.

Logistics has traded in line with the first quarter of last year with improved results in the freight management and services business.

Working capital and Funding
In line with its expectations, group working capital levels have shown some increase in the quarter mainly in the automotive and logistics division. Net debt is however expected to decline over the balance of the financial year as we generate positive cash flows by continuing to focus on reducing working capital levels in all the businesses.

During the first quarter, the company raised R1 billion in long-term funding primarily to refinance maturing debt and to improve the maturity profile of group borrowings.

Management appointments
Dominic Sewela, currently Chief Executive of Barloworld Equipment southern Africa, will be appointed as deputy Chief Executive of Barloworld effective 1 March 2016. Dominic will also retain his responsibilities as Chief Executive of Barloworld Equipment southern Africa. In his capacity as deputy Chief Executive of Barloworld Dominic will report to the group Chief Executive Clive Thomson and become involved in certain broader group responsibilities.

The remaining group executives retain their existing responsibilities and continue to report to the group Chief Executive, Clive Thomson.

Quinton McGeer, currently General Director of Equipment Russia (Vostochnaya Technica), will succeed Viktor Salzmann as Chief Executive of Equipment Iberia on 1 October 2016 when Viktor Salzmann retires from his executive responsibilities after a long and distinguished career with the company.

Gavin Knight, currently an executive director of Barloworld Equipment southern Africa, will succeed Quinton McGeer as General Director of Equipment Russia on 1 October 2016. He will relocate to Novosibirsk, Russia in May 2016 to allow for an effective handover process. Gerhard Vorster, currently an executive director of Barloworld Equipment southern Africa, will be appointed as Chief Executive of the Equipment business for the African territories outside of South Africa on 1 April 2016. His role will include Gavin KnightÆs previous responsibilities and will cover the countries of Angola, Botswana, Malawi, Mozambique, Namibia and Zambia.

Directorate
Dr Alexander Landia, an independent non-executive director, resigned from the Barloworld board with effect from 31 December 2015 as a result of increased external business commitments.

Mr Gordon Hamilton, having reached retirement age for non-executive directors, retires from the board and as chairman of the audit committee and member of other sub-committees of the board at this annual general meeting.

The directors of Barloworld extend their thanks to Mr Hamilton and Dr Landia for their contributions during their tenure on the board.

Board committees
The following Barloworld board committee appointments were approved by the board with immediate effect:

Risk and Sustainability Committee -- B Ngonyama (Independent non-executive director); D Sewela (Executive Director)
General Purposes committee -- S Ntsaluba (Independent non-executive director); I Shongwe (Non-executive director)
Nomination committee -- I Shongwe (Non-executive director)

Mr Keith Rankin, the Chief Executive of Barloworld Automotive, and Mr Steve Ford, the Chief Executive of Barloworld Logistics, have also been appointed to the Risk and Sustainability committee.

I Shongwe steps down as a member of the risk and sustainability committee with immediate effect.

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