Group strategy

This year marks 116 years of contribution to the communities and societies to which we belong. It is a proud history that we are committed to upholding. Our transition to a new leadership has provided an opportunity to think strategically about the future and reflect on our past performance.

In 2017 we worked to align both internal and external stakeholders, including board and management, on Barloworld’s medium-term strategy, informed by our bold ambition. In our last report we outlined our challenges and shortcomings in value creation, which, along with our assessment of the full potential of each of our businesses, informed the context of our change and identification of value-enhancing opportunities.

We forged a new path by explicitly defining our strategic goals and focus areas to deliver on our ability to sustainably maximise value creation. We began implementation of our strategy without delay, the results of which started to manifest in our 2018 half-year results.


To double the intrinsic value of our business every four years, enabled by the managing for value operating model.

Our vision to delight our customers and maximise shareholder value is grounded in the understanding that we must run a successful business that generates superior returns for our shareholders in order for us to create value for stakeholders and contribute meaningfully to the societies in which we operate.

Forging a new path

During the corporate level strategy review process, we considered all aspects of the group and its businesses. This review caused us to reflect on the following items:


What is the full potential of each business in the portfolio today in the context of the constraints of their existing markets?

Are there opportunities within each of our chosen business segments to further expand the group?

What else would we need to deliver on our growth for value ambitions?

Our new strategy seeks to create value by balancing our long-term growth ambitions while focusing on achieving acceptable returns for our shareholders in the medium term. This will continue to be underpinned by our responsible citizenship programme. In order to adapt to this new operating context and achieve our ambition, the group will drive the strategy by addressing three critical levers in the short to medium term:

Fix and optimise our existing portfolio

Implement a more active shareholder operating model

Add high-growth businesses to our portfolio

Our vision will remain while these levers will change over time as we implement our strategy and adapt to a changing environment. As this change occurs we continue to find the right levers to pull to ensure the ongoing creation of shared value for our stakeholders.



2017 Key initiatives outlined – executed in 2018




Equipment Iberia: business improvement, restructuring and disposal


Sale finalised and concluded in June 2018

Logistics: business performance improvement and restructuring


Significant turnaround – Improved performance in the 2018 financial year


Cash flow: R520 million cash generated (2017: R260 million)


Return on invested capital at 8.7% (2017: 2.5%)


Economic profit (R73 million) (2017: (R238 million))



Equipment Southern Africa: operational transformation


Reduced net expenses

Automotive: motor dealership portfolio assessment and cost base review


Dealer network review resulting in closure of an underperforming dealership and one non-core business


Dealership and head office cost review and realignment, resulting in headcount reduction, reduced expenses and improved operational efficiencies

Active portfolio management and performance monitoring

During the reporting period, we implemented the Barloworld managing for value operating model, an integrated managerial process systemically designed to enable us to effectively translate the strategic intent and bold ambition into value, by closing the value gap identified.

The process provides a focused agenda on the identification, execution and monitoring of priorities with the highest values-at-stake that close the value gap, the benefits of which include:

  • Decoupling of strategy development from strategic planning
  • Embedding a dynamic resource allocation model to allocate capital and talent in line with the most value-maximising options
  • Simplification and focus of strategic planning on the main value drivers of the business (supplemented by a detailed budget) to enable the business to get to full potential
  • Simplification and focus of the performance management process, with fewer, consistent and value‐related key performance indicators (KPIs) for improved line of sight and consequential accountability


Post the reporting period and, in line with our managing for value principle, we launched the Barloworld Business System (BBS) to help us build execution capability based on a continuous improvement methodology.


Post the reporting period we launched the Barloworld Business System (BBS), a methodology centred on embedding a value enhancing culture of continuous improvement; our Barloworld transformational way of addressing processes that hinder organisational effectiveness.

By simplifying our processes, understanding our value streams better, building execution capability and harnessing value opportunities that will help achieve our bold ambition, we will further embed the core principles of managing for value.

If we are to ensure that our customers win we have to free up our people’s time so they can do those things that add value, create avenues for them to participate in identifying problems, defining solutions, create clarity on outcomes and ownership thereof. That way we create better opportunities for them to grow and thrive, thus building sustainability of improvements where change capacity and operational excellence are the norm.

Capital allocation

In the 2018 financial year Barloworld committed to capital release targets aimed at effective resource allocation, and optimal deployment of capital. We have continued to focus on efficient capital utilisation to enhance ROIC and economic profit.

The cash release of R2.5 billion from the sale of Equipment Iberia allows us to deploy capital in another emerging market territory that is aligned with the group’s competencies and this opportunity is being explored. This is also part of our capital release programme that will see us build cash up to R8 billion over the next six to nine months with focus on the following areas:

  • Automotive Avis Fleet – Leasing: R3 billion – R4 billion (six months)
  • Equipment Southern Africa Rental: R2 billion (six to nine months)
  • Optimising our capital structure through capital reduction (ongoing)

Looking ahead

The group will drive the disciplined allocation of capital by addressing its critical levers in the short to medium term.

Active shareholder operating model


Further embed our management principles to drive operational excellence and delivery capability through our managing for value and BBS methodology

Add high-growth businesses to our portfolio


Existing portfolio
In Equipment and Automotive we will target adjacencies that are asset light, counter-cyclical and offer synergies with customers or product, with growing profit pools

New business will leverage existing distribution capabilities and competency

The group will focus on investigating opportunities to deploy capital into higher return businesses utilising strict criteria to ensure value accretive growth

Focus will be in emerging markets and regions contiguous to our existing territories

Progress against our strategic objectives



Our objective is to be the investment of choice by delivering top quartile returns to our shareholders, as measured by the return we generate on the capital invested.


During the year, we continued implementing the strategy, following the review conducted in the prior year, to identify and address underperforming areas of the business through targeted interventions and projects focused on improving efficiency, while exploring acquisitive opportunities. The effects and sustainability of the interventions are beginning to reflect in the current year returns.

Key performance indicators

Measure Target   2018 2017 2016
Return on equity* (%) ≥15.0   11.4 10.5 9.3
Return on invested capital* (%) ≥13.0   12.3 11.2 9.4

* For continuing operations.



To deliver on our ambition, we actively drive profitable growth across all businesses, to ensure we meet the expectations of our stakeholders.


During the year, we embedded the reviewed and revised measures used to assess the profitability of our operations, moving towards a more balanced view of value creation.

Key performance indicators

Measure Target   2018 2017 2016
Economic profit (Rm) ≥0   (48) (286) (859)
Economic profit delta (Rm) ≥0   238 574 (140)
Free cash flow (Rm) ≥0*  3 591 3 405 4 279

* Positive free cash flow after interest, before dividends and before major corporate actions.



To deliver, we need to ensure we instil a high-performance culture that emphasises and rewards sustainable delivery.


During the year, we progressed our understanding of the human capital capabilities we need to support our new strategic ambition. We identified key talent within the business and have developed interventions to support their growth.

Key performance indicators

Measure Target   2018 2017 2016
Work-related fatalities Zero   2 3 1
Lost-time injury frequency rate (LTIFR)* ≤0.5   0.69 0.75 0.75
Total direct training spend per employee ≥R8 000   R4 171 R6 472 R5 195
Diversity and inclusion (2020 targets)          
% women of total headcount ≥35%   28% 28% 26%
% women in middle management level and above ≥40%   38% 36% 34%
% African, Indian and Coloured (AIC) employees of total headcount ≥75%   76% 74% 72%
% AIC employees in middle management level and above ≥50%   45% 42% 34%
Rating level under the dti codes Level 4 or better   Level 3 Level 3 Level 3

* Lost-time injuries multiplied by 200 000 divided by total hours worked.