Overview and progress

Barloworld is a constituent of:

Dow Jones Sustainability Emerging Markets Index, Global Compact 100 Index and the JSE Socially Responsible Investment Index

Sustainability in strategy

Our Value Based Management (VBM) approach underpins sustainable development in Barloworld. This requires the integration of activities addressing economic, environmental and social aspects, and balancing the short and long-term interests of all stakeholders, including the communities in which we operate. This is institutionalised through structured strategic planning and risk management initiatives, a leadership philosophy and management approach that entrenches accountability for sustainable value creation, stakeholder engagement, and a commitment to consistent, transparent and comparable reporting.

Central to our VBM approach and sustainability are these commitments to:

Enhancing our customers’ success by providing the integrated and environmentally sound solutions they require to remain competitive and meet their own sustainability objectives.
Mutually beneficial relationships with our principals and representing them in a way that enhances their success and reflects their sustainable development objectives.
Providing a safe and healthy workplace for employees where all have equal opportunities, are inspired to fulfil their ambitions and be proud ambassadors of Barloworld.
Conducting our operations in an environmentally responsible manner.
Identifying profitable growth opportunities and executing our strategic plans effectively and efficiently.
Engaging our stakeholders and being a responsible corporate citizen for all of them, including contributing to social and economic development of the communities in which we operate.
Delivering top-quartile returns to our shareholders through responsible business practices.

We recognise that a strong commitment to sustainable development is an important aspect of securing the skills required to realise our strategic goals, central to participating in legitimate value chains and at the core of responsible corporate citizenship.

Our 10 Pillars of Sustainability are used to guide our activities, assess progress, and act as a filter against which future opportunities are considered.

Pillars of sustainbility
Barloworld’s 10 Pillars of Sustainability
Barloworld Awards 2014
1.2, 2.10, 4.14 to 4.17; EN5 to EN7, EN10, EN18, EN26,
EN27, EN30; LA1 to LA15; S01, S09, S010; EC1

Executing our strategy

Barloworld 20153

Our current strategic approach is underpinned by a suite of operations with similar business models and core competencies, common customers and realisable synergies. The business model includes delivering our products and services into identified markets, growing these markets and realising the aftermarket opportunities. Successful execution of this cycle results in growth, resilience and the ability to create long-term value for stakeholders.

The group’s strategic planning process is a combination of its “top-down” strategic framework with the overall group structure and major investment decisions being made centrally, complemented by strategic and operational planning, and execution, being decentralised into its divisions.

Divisions’ strategic plans are consistent with the group framework and guided by an aligned process. A robust and systematic identification of risks and opportunities is central to our strategic planning process.

Divisional plans are presented to the group executive on an annual basis and key aspects are consolidated into a group strategic plan, which is presented to the board for review and endorsement.

Through a consistent strategic framework and an aligned approach, strategies are efficiently and effectively executed throughout the group addressing stakeholder issues and group risks.

The board monitors the implementation of plans and divisional executive teams are accountable for fulfilling their strategic plans, meeting objectives and achieving key performance indicators.

Strategic plans are executed through elements of our comprehensive Integrated Employee Value Model which includes accessing, harnessing and directing the group’s collective wisdom. The framework also includes a structured performance management system ensuring attention to top imperatives and value drivers, and enables employees to benefit appropriately from value created. An Integrated Financial Value Model highlights areas of focus to optimise value creation activities (value drivers), measures progress against objectives and provides relevant peer comparisons. These aspects enhance the group’s value creation capability.

In line with the SFAs of improving our financial returns and profitable growth, the group has set hurdles for allocation of financial and other resources to opportunities and continually assesses the performance of existing operations against these hurdles. Businesses are exited where it is believed that they will not be able to meet the required performance level and investments are made into opportunities that align with the group’s strategic direction. Examples are: exiting our Australian motor retail business and Handling’s international Lift-truck operations and a number of investments by the Automotive and Logistics division. Internal structuring and resource allocation have directed focus on our Global Power business, which is well positioned for expansion.

With 2014 being the penultimate year of our current five-year strategic plan, focus has been on achieving our 2015 objectives while extending our strategic perspective to 2020 and beyond, and defining a strategic framework for the period 2016 to 2020 is receiving attention.

2014 progress

Key performance indicators have been set to track our progress against our Strategic Focus Areas.

Strategic Focus Area   Strategic objectives   Key performance indicators   2014 performance   2015 outlook
  Achieve targeted compound growth in total shareholder returns over five years to September 2015.  
Top-quartile growth in total shareholder returns over five years to 2015
Increase group operating profit by executing turnaround and growth strategies
Execute identified growth projects for each division
 
Share price compound growth of 18.6% off September 2010 baseline
Operating profit up 16% in current year
EMPR enhances solutions offerings
Global Power growth strategy continues to gain
momentum
Niche acquisitions and growth projects implemented in Automotive and Logistics
 
Pursue identified strategic growth and value creation
opportunities
  Build an organisation that adds value to employees as our success is based on inspired, aligned, empowered, results-driven, globally competitive, passionate people who create value through strategic innovation and continuous improvement.  
Drive employee engagement: Individual Perception Monitor (IPM) overall score above 75% for all businesses
People development and succession aligned with strategic growth priorities
Leadership development and retention
Provide a safe and healthy work environment
 
Overall divisional IPM scores range from 2.78 to 3.30
Individual Career Reviews and Talent management
discussions and planning completed
Leadership and executive development programmes
conducted
LTIFR increased to 1.23 despite safety focus
Tragically, there were three work-related fatalities in
motor vehicle accidents
 
Continue entrenching employee value model to drive both employee productivity and increased engagement reflected
in improved IPM scores
Ensure leadership succession and development through structured knowledge transfer initiatives
Continued drive on inculcating a safety culture, reflected in a reduced LTIFR and eliminating work-related fatalities
Manage and adjust headcount and employee profile to match business activity
  Drive market leadership through competitive differentiation by accelerating the evolution of
our business model from pure distribution to the provision of flexible, value-adding, integrated customer solutions.
 
Market leadership in targeted segments through delivery of integrated customer solutions
 
Market leadership position retained across most businesses
Successful integration of the former Bucyrus distribution
and support businesses provides expanded product range to customer base in surface and underground mining
Niche acquisitions in Automotive and Logistics continue to expand customer solutions and support business model
 
Leveraging technology in our integrated solutions to assist customers achieve their objectives
  Develop products and services to capitalise on emerging sustainable business opportunities, realise cost savings though energy efficiency and other sustainable business practices, and enhance Barloworld’s reputation by leading in sustainable development.  
Aspirational target of a 12% efficiency improvement in non-renewable energy consumption and greenhouse gas emissions (scope 1 and 2) by end of 2014 financial year (2009 baseline)
Cumulative cost savings through sustainability initiatives
Pursue emerging commercial opportunities
 
The majority of our operations performed ahead of our aspirational group target. However, relatively higher energy and emissions intensities in our expanding logistics road
transport operations negatively impacted progress and the group did not achieve its target being 27% and 10% worse than target on energy efficiency (GJ/Rm revenue) and GHG emissions efficiency
(tCO2e/Rm revenue)
respectively
Forty-two Energy and nine water-savings initiatives
implemented in operations with related savings
Investment in re- provides a platform for pursuing
environmentally sustainable commercial opportunities
 
To maintain momentum, we have set another aspirational group target of a 2% efficiency improvement against a business-as-usual perspective for our non-renewable energy consumption and related greenhouse gas emissions (scope 1 and 2) for the end of our 2015 financial year off a 2014 baseline year. The short term target continues our focus on these aspects, while the group develops its longer-term five-year plan and objectives for the period 2016 to 2020
Continue to pursue sustainability business opportunities and cost savings
  Enhance competitiveness, credibility, legitimacy and reputation in the eyes of all stakeholders by leading in broad-based empowerment and transformation  
Department of Trade and Industry’s B-BBEE Level 2 or 3 rating for each South African business unit
Leadership position
Drive gender equality, localisation, support for people with disabilities and diversity across the group
 
Ranked as number 1 in general industrial sector in B-BBEE for the fifth consecutive year
Preliminary reports for all South African operations indicate a Level 2 or 3 B-BBEE rating
Preliminary reports indicate group B-BBEE Level 2 rating
General staff trust shares to the value of some R281 million vested in 11 531 employees
Initiated and conducted five supplier diversity workshops in South African divisions covering some 300 suppliers
Education Trust sponsored 16 bursars to the value of about R1.6 million
 
Initiated plans to align SA operations to dti’s revised B-BBEE Codes of Good Practice to continually enhance the group’s competitive position
Continue with supplier workshops aimed at increasing our efficiency and diversity of our supplier base
Continue to engage identified principals to develop appropriate localisation strategies
Continue to focus on diversity including gender and minorities representation across the group and at all levels
  Achieve top-quartile financial returns as measured against peer groups in each of our chosen business segments  
Top-quartile financial returns on average through the cycle (at or above our cost of equity, and measured against relevant peer groups in our chosen business segments)
Achieve return on equity target (15%)
Achieve return on net operating assets target (20%)
Internal targets and hurdle rates set for all businesses
Release capital from underperforming assets
 
Group return on equity declined from 12.2% to 11.6% following trading losses and restructuring costs in Spain
Group return on net operating assets improved from 18.0% to 18.8%
Strong improvement in returns from the Automotive and Logistics division
Realised R1.3 billion on disposal of Australian motor retail business to reinvest in higher returning growth opportunities
 
Cost management to drive margin improvement
Improve returns on underperforming assets
Reallocation of capital to achieve optimal returns
Optimise debt levels through efficient working capital management
Continue to entrench the financial value model in our operation
2015 revenue outlook ranges provided for major operations

Barloworld 2020

Our 2020 strategic framework will be communicated to our top leadership at our Global Leaders Conference in March next year and will inform our approach for the strategic period 2016 to 2020. The draft framework builds on central aspects of our current approach, intends to refine our approach to sustainable value creation for our stakeholders and seeks to establish credible key performance indicators for progress assessment and reporting. A collective approach is being adopted in developing this plan which includes a significant contribution from executive teams participating in our executive development programme.