Investing for profitable growth

Investing for profitable growth

Strategic intent

Achieve targeted compound growth in total shareholder returns over five years to September 2015.

Growth activities

The industries and regions in the table below have been identified to provide growth opportunities for the group into the future. While significant opportunities have been identified and are currently under review, a number of niche acquisitions and growth projects were implemented during the year, which include:

–	Acquisition of a Toyota dealership in the Northern Cape
–	Acquisition of majority stake in a Jaguar Land Rover dealership in Mpumalanga
–	Acquisition of a specialised transport business in South Africa
–	Acquisition of an abnormal load transport operation in South Africa
–	Acquisition of a Fleet Services business in Tanzania effective 4 November 2014
–	Entry into the mobile crane market in South Africa

Key focus areas

Industry	Growth driver	Geography

Mining	Emerging market industrialisation riving long-term demand for commodities.	Southern Africa, Russia

Infrastructure	Infrastructure backlogs and rapid urbanisation in developing economies.	Southern Africa, Russia, Iberia

Power	Increasing demand in electricity, marine, petroleum and industrial power segments.	Southern Africa, Iberia,Russia

Agriculture	Importance of food security, growing demand for biofuels and rich agricultural potential across southern Africa.	Southern Africa, East Africa, West Africa

Automotive	Increasing need for flexible vehicle usage solutions in private, corporate and government segments and exposure to the growing tourism market.	Southern Africa, Middle East, Europe

Logistics	Growing international trade and trend to outsource supply chain management activities.	Southern Africa, Middle East, Europe

The growth segments are central to our 2015 strategic objectives and align with our emerging 2020 perspective. Given our strategic profile, representation of principals and Original Equipment Manufacturers (OEMs) and brands, as well as our regions of activity, we are well placed to realise opportunities in these segments.

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On the growth trail

The Automotive and Logistics division has implemented various strategic actions in pursuing profitable growth during the last financial year. These actions result from ongoing strategic analysis as well as supporting the Barloworld group’s clearly identified growth segments.

Collaborative growth

Mining is a clearly defined growth pillar and primarily a focus for Barloworld Equipment. When the automotive units identified the Northern Cape as a possible growth area driven by mining activity, Barloworld approached Toyota to explore opportunities to replicate the successful formula that the group has with Toyota in the eMalahleni and Middelburg regions in Mpumalanga. This led to the acquisition of Leach Toyota which was effective from 10 March 2014. The dealership has been successfully integrated into the Motor Retail business unit and has been profitable from the start. This has opened the way for further growth across the Automotive unit with further opportunities to service the Avis Rent a Car branch in Kathu, as well as provide a base for Avis Fleet Services to expand its offering into the Northern Cape region and building on the group automotive offering in the region.

Geographic expansion

Africa remains attractive to various businesses within Barloworld. Avis Fleet Services commenced operations in Ghana in 2011 and the business is well positioned for growth in the region. The leasing business has a long sales cycle which takes time to grow the fleet size. After thorough analysis, a small leasing business was identified as a fast entry into the Tanzanian market. This will allow the business to take over a stable fleet and customer base from which to continue growing in this new territory.

Growing in scale

Following on the successful acquisition and formation of Manline Mega (the Abnormal Load Transport business) in Barloworld Transport, the opportunity arose to further expand the capabilities of this unit by acquiring Kumkani which operates in the extra-heavy transport segment, with equipment capable of transporting loads between 80 and 120 tons. This acquisition complements the existing operation and the trailers are equipped to transport large mining trucks and other specialist equipment. Allied to this operation is the use of mobile cranes to load and unload cargo. A study showed the significant opportunity that exists within the mobile crane market. An acquisition was the preferred entry route, however, an opportunity presented itself, after careful analysis, to employ an industry expert, backed by a solid management team, and deploy the capital into acquiring assets rather than buying a business. Barloworld Cranes will commence operations in January 2015.