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Trading Update and Pre Close Brief
Imperial Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1946/021048/06
Share code: IPL
ISIN: ZAE000067211
("Imperial")
Trading Update and Pre Close Brief
Introduction
Imperial’s management team will today be hosting members of the
investment community at its Investor Day in Johannesburg. The
following update will be provided during the event.
Environment
Global economic growth expectations for 2015 have declined since
January to 2.8% as developed markets recover slower than expected
and developing markets face two transitions: lower commodity prices
that are punishing exporters; and US dollar strength (in
anticipation of tightening monetary conditions) that is exerting
pressure on capital inflows and therefore currencies.
South Africa is a victim of both of these developments with the
fragility of the economy exacerbated by the electricity crisis and
reflected in the skittish consumption patterns of ordinary South
Africans and the low confidence of investment decision makers.
These are manifest in soft demand for Imperial’s products and
services and aggressive competition on every front. Vehicle buyers
are highly price sensitive trading down to smaller or pre-owned
vehicles, consumer goods volume growth is weak and bulk commodity
volumes are in decline.
The slow recovery of the Eurozone and more specifically weak exports
from Germany, are exerting pressure on Imperial’s volumes, rates and
utilisation in that region.
Divisional Performance
Logistics Africa
The previously reported revenue and operating profit for this
division for the six months to 31 December 2014 was R13,3 billion
and R802 million respectively.
In South Africa the division continues to perform satisfactorily in
a testing environment, benefitting from operating efficiencies and
its favourable market position as the country’s leading provider of
end to end logistical solutions. New contract gains are compensating
for marginal or negative volume growth in the mining, manufacturing
and retail sectors.
The division’s aggressive strategy to be a significant provider of
FMCG and pharmaceutical logistical services in SADEC, East Africa
and West Africa is being executed as planned. Organic growth is
being augmented by acquisitions performing in-line or ahead of
expectations.
Full year guidance for the Logistics Africa division is unchanged:
we expect real growth of revenues with operating profit growing at a
higher rate.
Logistics International
The previously reported revenue and operating profit for this
division for the six months to 31 December 2014 was R9,6 billion and
R386 million respectively.
Despite high barriers to entry arising from specialised technical
expertise in inland waterway shipping, contract logistics and
container port operations, the slow economic growth continues to
supress volumes, rates and utilisation.
Full year guidance for the Logistics International division remains
unchanged: we continue to expect real growth of revenues with
operating profit in line with 2014.
Vehicle Import, Distribution and Dealerships
The previously reported revenue and operating profit for this
division for the six months to 31 December 2014 was R14,3 billion
and R461 million respectively.
The division continues to face extremely challenging trading
circumstances, with the competitiveness of its fully imported new
vehicles being eroded by a weak Rand and the Automotive Production
and Development Programme (APDP) benefits enjoyed by local
manufacturers.
Full year guidance for the Vehicle Import, Distribution and
Dealership division remains unchanged: we continue to expect real
growth of revenues with operating profit well below 2014.
Vehicle Retail, Rental and Aftermarket Parts Division
The previously reported revenue and operating profit for this
division for the six months to 31 December 2014 was R18,7 billion
and R791 million respectively.
The division continues to deliver a solid performance from its new
and pre-owned passenger vehicle dealerships. Flagging business
confidence in South Africa is contributing to lower commercial
vehicle dealership volumes whilst the United Kingdom commercial
vehicle dealerships are performing to expectation.
Aftermarket parts are performing to expectation while the car rental
business continues to experience lower volumes in most segments.
Full year guidance on our Vehicle Retail, Rental and Aftermarket
Parts division is unchanged: we continue to expect real growth of
revenue and operating profit for the year.
Financial Services
This division comprises Regent Insurance and Liquid Capital, the
latter an integral part of the Vehicle Import, Distribution and
Dealerships division.
The previously reported revenue and operating profit for the
Financial Services division for the six months ended 31 December
2014 was R2,2 billion and R511 million respectively.
On the 27th May shareholders were advised that Imperial has entered
into exclusive negotiations for three months with The Hollard
Insurance Group and an associated party, regarding the acquisition
by Hollard of Imperial`s interest in Regent Insurance Company
Limited and Regent Life Assurance Company Limited (“Regent”). This
process is proceeding as anticipated and shareholders will be
advised of further developments in due course.
Full year guidance on our Financial Services division has remained
unchanged: we expect single digit growth of revenue and operating
profit.
Imperial Group
The refinement of the Imperial portfolio remains an imperative in
pursuit of sharper executive focus and higher returns on capital and
effort in the medium term. This will be accomplished firstly by
investing in assets and acquisitions that will improve growth,
returns and sustainability for stakeholders and secondly by
disposing of those that are non-core, strategically misaligned,
underperforming or of low return on effort.
The previously reported revenue and operating profit for Imperial
Holdings Limited for the six months to 31 December 2014 was R56,2
billion and R2,9 billion respectively.
Full year guidance remains unchanged: we expect Imperial's second
half operating performance to be positive, but with earnings for the
year to June 2015 to be below 2014.
The forecast financial information herein has not been reviewed or
reported on by Imperial’s auditors.
Sponsor:
Merrill Lynch SA (Pty) Limited
Date: 24 June 2015
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