Wrap Text
Unaudited interim results for the six months ended 31 December 2015
Imperial Holdings Limited
Registration number: 1946/021048/06
Ordinary share code: IPL ISIN: ZAE000067211
Preference share code: IPLP ISIN: ZAE000088076
Unaudited interim results for the six months ended 31 December 2015
Imperial Holdings is a JSE listed South African-based international Group of companies active in two chosen areas of mobility:
- consumer and industrial logistics; which constitutes respectively 40% and 42% of Group* revenue and operating profit, with 66% of the latter generated
internationally; and
- vehicle import, distribution, dealerships, rental and aftermarket parts, and vehicle-related financial products and services; which constitutes respectively
60% and 58% of Group* revenue and operating profit, with 11% of the latter generated internationally.
Imperial employs over 51 000 people who generate annual revenues of approximately R120 billion, mainly in Africa and Europe, through five major
divisions which operate under separate management structures to enable decentralised entrepreneurial creativity within the Group's clearly-defined
strategic, capital, budgetary and governance principles.
* Excluding Regent, head office and eliminations
Highlights
Revenue up 6% to R59,8 billion (41% foreign)
Operating profit up 7% to R3,1 billion (34% foreign)
HEPS up 6% to 801 cents per share
Core EPS up 7% to 861 cents per share
EPS up 19% to 881 cents per share
Return on invested capital 11,6%
Weighted average cost of capital 8,7%
Return on equity 17%
Interim cash dividend up 6% to 370 cents per share
Results overview
Imperial's performance in the six months to December reflects sound management of controllable factors under testing circumstances.
- Revenue and operating profit for the Imperial Group grew 6% to R59,8 billion and 7% to R3,1 billion respectively, partly due to the inclusion of the Imres
and S&B Commercials acquisitions for the full six months.
- Excluding current year acquisitions, revenue and operating profit increased 4%. Revenue and operating profit from continuing operations, excluding
Regent, was up 6% to R58,2 billion and 4% to R2,8 billion respectively.
- The Group's operating margin was maintained at 5,1%.
- A full reconciliation from earnings to headline earnings and core earnings is provided in the Group Financial Performance section.
- The net debt to equity ratio (including preference shares as equity) improved to 76% from 79% in December 2014.
- The Group's return on invested capital (ROIC) was 11,6% and the weighted average cost of capital (WACC) was 8,7%.
- Cash flow from operating activities decreased to R89 million from R909 million in the prior period, largely as a result of increases in capital expenditure
on rental assets, working capital, interest and taxes paid.
- An interim cash dividend of 370 cents per share was declared, up 6% on the prior period.
These results reflect progress with Imperial's previously espoused intent to decouple the Group's performance from the impact of Rand weakness on the
Vehicle Import, Distribution and Dealerships division, as it pertains specifically to the competitiveness and profitability of directly imported new vehicles.
- Non vehicle revenue and operating profit increased 6% to R24,8 billion (41% of Group* revenue) and 3% to R1,5 billion (54% of Group* operating profit)
respectively.
- Foreign revenue increased 21% to R24,5 billion (41% of Group* revenue) and foreign operating profit increased 22% to R969 million (34% of Group*
operating profit). Rest of Africa revenue increased 26% to R6,8 billion (12% of Group* revenue) and operating profit increased 42% to R446 million (16%
of Group* operating profit).
* Excluding Regent, head office and eliminations.
Environment
In January 2016 the IMF again lowered its global growth forecasts for 2016 to 3,4%; for Advanced Europe to 1,7%; for Germany to 1,7%; and for the United
Kingdom to 2,2%. The sub-Saharan Africa 2016 forecast has been reduced to 4,0%, with South Africa forecast to grow below 0,7% compared to 1,5% in
2015.
In addition to slowing global growth and the factors affecting all commodity based emerging economies, South Africa's growth during the reporting period
was depressed by the structural impediments of unemployment and low skills and the early effects of the drought. The deterioration of business confidence,
private sector investment, capital flows, the balance of payments and the Rand was exacerbated by political ineptitude, policy uncertainty and rising
perceptions of corruption.
With 59% of its revenues generated in South Africa, 29% in Advanced Europe and 12% in sub Saharan Africa north of South Africa in H1 F 2016, Imperial is
affected by these global and local economic conditions.
More specific uncontrollable factors directly influencing Imperial's businesses in the first half of the 2016 financial year were: a sharp decline in commodity
volumes; subdued consumer goods volumes; currency movements in Africa; unusually long periods of low water levels on the River Rhine; a 24% decline of
the average R/$ exchange rate on the comparable half and a 6% decline in national new vehicle sales.
Against this background we provide shareholders with current information on the Group's strategy and performance.
Strategy
Imperial strives to create long term value for stakeholders though strategic clarity, financial discipline, operational excellence and strictly defined capital
allocation principles.
Our investment thesis is unchanged:
- We will release capital and sharpen executive focus, by disposing of non-core, strategically misaligned, underperforming or low return on effort assets.
- We will invest capital in South Africa to maintain the quality of our assets and our market leadership in logistics and motor vehicles.
- We will invest capital in the Rest of Africa primarily to achieve our 2020 objective for the revenue and profits generated by logistics in that region to
equal that of our South African logistics business, and secondarily to expand our vehicles and related businesses in the region.
- We will invest cash generated from operations and from divestments to grow our businesses beyond the continent, but with an emphasis on logistics.
- The development and sustainability of Imperial will be underpinned by investment in human capital and information systems.
Divisional performance
Logistics Africa
% change
HY1 HY1 % HY2 on HY2
2015 2016 change 2015 2015
Revenue (Rm) 13 265 13 714 3 12 082 14
Operating profit (Rm) 802 802 785 2
Operating margin (%) 6,0 5,8 6,5
Return on Invested Capital* (%) 11,9 9,6
Weighted average cost of capital* (%) 8,9 8,9
* Calculated on a rolling 12 month basis
In South Africa, the division's revenue and profitability was under pressure due to soft volumes in most sectors, particularly in consumer products and
commodities.
The industrial logistics businesses servicing the manufacturing, mining, commodities, chemicals and construction industries continued to experience declining
volumes, which depressed revenue growth and operating margins.
The consumer logistics businesses recorded revenue growth but operating profit was depressed by new systems implementation and the resultant
managerial diversion and operational complexities.
The division's operations in the Rest of Africa continued to perform well, with revenue and operating profit growing by 15% and 35% respectively. This
performance was supported by volume growth, the contribution of strategically aligned acquisitions in the pharmaceuticals sector, and the inclusion of Imres
for the full six months in H1 2016. Expansion into new markets and partnerships with new principals delivered favourable results. The strategy to be a
significant provider of consumer goods and pharmaceutical routes-to-market in Southern, East and West Africa is on track with acquisitions performing in line
with or ahead of expectations.
The division incurred net capital expenditure of R597 million (2014: R441 million), the increase mainly attributable to the transport fleet and property
investments.
In HY2 2016 the continued slowdown of the South African economy is expected to exert ongoing pressure on profitability and margins in the South African
division, while operations in the Rest of Africa are expected to sustain a positive trend.
Overall, we expect Logistics Africa to grow revenue, with a marginal growth in operating profit in F 2016.
Logistics International
% change
HY1 HY1 % HY2 on HY2
2015 2016 change 2015 2015
Revenue (Rm) 9 595 10 306 7 9 476 9
Operating profit (Rm) 386 397 3 572 (31)
Operating margin (%) 4,0 3,9 6,0
Return on Invested Capital* (%) 7,6 8,1
Weighted average cost of capital* (%) 6,7 6,2
* Calculated on a rolling 12 month basis
% change
HY1 HY1 % HY2 on HY2
2015 2016 change 2015 2015
Revenue (Euro m) 678 688 2 713 (4)
Operating profit (Euro m) 27 27 - 43 (37)
Operating margin (%) 4,0 3,9 6,0
The restructuring of the division into two integrated client facing sub divisions (Imperial Transport Solutions and Imperial Supply Chain Solutions) was
executed as planned, and opportunities for simplification and cost reduction are being exploited.
Operating profit pressures arising from soft volumes and unusually long period of low water levels on European waterways were offset by contract gains,
cost-cutting measures and a growing contribution from the South American inland shipping business. The weakening of the Rand against the Euro assisted
the Rand-denominated results.
Divisional net capital expenditure of R513 million (2014: 614 million) was incurred during the year. Most of this was invested in additional capacity for the
chemical manufacturing business and two additional convoys commissioned during the year to meet the growing demand for inland waterway transport on
the Rio Parana in South America. This business now utilises five push boats with 60 barges, some redeployed from Europe. The success of this business is
evidence of the division's ability to transfer core capabilities to new markets.
We expect Logistics International's revenue and operating profit to decline in Euro's in F 2016, due to strategic disposals (largely Neska) and increased
labour costs in certain of the automotive sites we serve.
Vehicle Import, Distribution and Dealerships
% change
HY1 HY1 % HY2 on HY2
2015 2016 change 2015 2015
Revenue (Rm) 14 278 14 590 2 13 159 11
Operating profit (Rm) 461 532 15 499 7
Operating margin (%) 3,2 3,6 3,8
Return on Invested Capital* (%) 5,7 6,1
Weighted average cost of capital* (%) 9,1 9,5
* Calculated on a rolling 12 month basis
Notwithstanding extremely challenging trading conditions during the period, operating profit increased by 15% and the operating margin increased to 3,6%
from 3,2% in the prior period. Both were affected by lower new vehicle sales volumes, offset by price increases.
Although the Rand was weaker against the Euro and more so against the US Dollar, the division achieved increased profitability, which was enhanced by a
strong performance from Renault, Goscor, the newly developed African operations and improved parts sales. Forward cover on the US Dollar and Euro imports
currently extends to July/August 2016.
In South Africa, the division retailed 44 629 (2014: 49 269) new and 19 378 (2014: 18 690) pre-owned vehicles during the period. The division's South
African new vehicle registrations as reported to NAAMSA were 9% lower than the previous period.
Annuity revenue streams generated from after-sales parts and service were under pressure with revenue from the rendering of services down 3%.
The growing vehicle parc of our imported brands, over 1 million, is delivering good levels of after-market activity for the dealerships.
Divisional net capital expenditure increased to R1,1 billion (2014: R813 million) as a result of additional vehicles leased to car rental companies and an
increased investment in properties.
In the absence of a marked deterioration of vehicle sales, we expect the Vehicle Import, Distribution and Dealerships division to deliver a real growth in
revenue and flat operating profit in F 2016, despite the sale of the Goscor business.
Vehicle Retail, Rental and Aftermarket Parts
% change
HY1 HY1 % HY2 on HY2
2015 2016 change 2015 2015
Revenue (Rm) 18 736 20 790 11 18 811 11
Operating profit (Rm) 798 801 - 879 (9)
Operating margin (%) 4,3 3,9 4,7
Return on Invested Capital* (%) 15,5 14,5
Weighted average cost of capital* (%) 9,8 9,9
* Calculated on a rolling 12 month basis
In South Africa, the division retailed 14 363 (2014: 15 611) new and 16,171 (2014: 16 249) pre-owned vehicles during the period.
The division delivered good growth in revenue as prices increased, while operating profit was flat.
In line with the market, South African passenger and commercial vehicle sales experienced a decline in new retail units. After sales parts revenue grew 8%
from both price and volume increases with anticipated growth a result of the strong new vehicle sales in the past three years. Despite this, both revenue
and operating profit in the local new and pre-owned vehicle businesses declined.
During the period car rental, Auto Pedigree and panel shops were placed under a single management team to facilitate integration throughout the rental,
accident repair and resale value chain. Rental volumes felt the effects of lower usage as government and companies reacted to challenging market
conditions. Unit sales at pre-owned specialist Auto Pedigree experienced moderate growth despite higher interest rates and a fragile consumer sentiment.
Panel shops delivered a disappointing performance as a result of lower volumes and the disposal of two outlets, effective 30th September 2015.
The Aftermarket Parts business saw revenue growth arising from price increases but operating profit was unchanged.
The United Kingdom commercial vehicle market continued to grow strongly with the truck market up 27% and the light commercial vehicle market up 15%.
Imperial's results were buoyed by this market growth and the acquisition of S&B Commercials, a Mercedes Benz commercial vehicle dealer, which is
performing in line with expectations and is included for the full 6 months in H1 F 2016. A weaker Rand enhanced the growth in Rands.
Divisional net capital expenditure of R573 million was incurred (2014: R792 million) largely on vehicles for hire and property development.
We expect the Vehicle Retail, Rental and Aftermarket Parts division to deliver single digit growth of revenue and single digit decline in operating profit
in F 2016.
Financial Services
% change
HY1 HY1 % HY2 on HY2
2015 2016 change 2015 2015
Motor Related Financial Products and Services
Revenue (Rm) 658 801 22 771 4
Operating profit - restated (Rm) 307 336 9 313 7
Operating margin (%) 47 42 41
Insurance (discontinued operations)
Revenue (Rm) 1470 1 565 6 1 564 -
Operating profit (Rm) 180 274 52 384 (29)
Adjusted investment income 87 120 38 121 (1)
Adjusted underwriting result 166 244 47 313 (22)
Intergroup eliminations (73) (90) 23 (50) (80)
Operating margin (%) 12,2 17,5 24,6
Underwriting margin (%) 11,3 15,6 20,0
The Motor Related Financial Products and Services business continued its strong financial performance and grew operating profit by 9% despite lower
vehicle sales. Innovative new products and improved retention and penetration rates in our sales channels contributed positively to the growth in these
businesses, providing valuable annuity earnings to underpin future profits. During the period, funds held under service, maintenance, roadside assistance and
warranty plans remained stable. The book growth in the alliances with financial institutions continued to grow strongly and the profits are healthy, driven
mainly driven by low credit loss ratios.
Notwithstanding management's additional responsibilities relating to executing the previously announced sale process, Regent is performing in line with
expectations. Regent's underwriting result increased by 47% mainly due to a lower claims ratio. Investment income increased by 38% due to good growth
in the off-shore equity portfolio as a result of Rand weakness, and the absence of the R16,0 million ABIL loss reported in the prior period.
The underwriting performance in Regent's short term business continued to benefit from more effective risk management resulting in improved loss ratios
in the heavy commercial vehicle business. New business penetrations of motor related value added products remained under pressure due to subdued
vehicle sales. Regent Life grew new business volumes. Regional business beyond South Africa remained a meaningful contributor to the division and
performed to expectations.
We continue to focus on growing the leasing business via Imperial Fleet Management and Ariva (Private leasing alliance) and building synergies within the
retail motor divisions.
Net capital expenditure of R453 million (2014: R636 million) was incurred in the Motor Related Financial Products and Services division, relating mainly to
vehicles for hire.
We expect real growth of revenue and operating profit from Motor Related Financial Products and Services. However, the impact of the disposal of Regent
on the Financial Services division's second half revenue and operating profit will depend on the timing of the regulatory approvals.
Disposals
Our strategy to dispose of non-core, strategically misaligned, underperforming or low return on effort assets gained momentum during the
reporting period. The disposals described below will generate proceeds of approximately R4,7 billion, which will initially be used to reduce debt until
redeployed in accordance with our strategic, investment and capital allocation criteria. Proceeds of R2,5 billion have been received to date.
Regent
On 29th September 2015 we announced the disposal of Imperial's 100% interest in the Regent Group. Imperial accepted an offer from the Hollard Insurance
Group and Yellowwoods Group (the umbrella holding company of Hollard), to acquire the Regent Group, Regent Botswana and Regent Lesotho for a purchase consideration
of R2,2 billion.
Agreements on this extraordinarily multifaceted transaction are approaching finality, with closure soon to be dependent only on regulatory approvals, the timing
of which is unlikely to be before the end of Imperial's financial year on 30 June 2016.
Neska group
On the 5th October 2015 we announced the disposal of our 65% interest in Neska to Hafen und Guterverkehr Koln ('HGK'), the Port Authority in Cologne,
Germany, for a total consideration of EUR 75 million (R1,3 billion), including loans repayments.
Neska, a leading player in inland port operations in Europe, was facing growing competition and disintermediation from landlords (port owners). As a result,
Neska's growth prospects under Imperial's ownership were limited.
The transaction was finalised on 11th December 2015.
Goscor group
On 3rd November 2015, the Group announced that an agreement had been entered into to dispose of the 67,5% share of the Goscor group to management
for a total purchase consideration of R1,03 billion, including loan repayments. Goscor, a subsidiary of our Vehicle Import, Distribution and Dealership division,
is an importer and distributor of industrial equipment, which we regard as non-core to Imperial's logistics and vehicles businesses.
The transaction was finalised on 5th February 2016.
Other
During the period, the Vehicle Retail, Rental and Aftermarket Parts division disposed of two panel shop outlets and two commercial dealerships were sold
to Lereko Motors, an Associate company, approved appropriately for a related party transaction.
Imperial Logistics International sold its 75% stake in ALS, a small shipping company, to the minority founder manager shareholders for EUR 5 million
(R84 million). The transaction was finalised on 27th January 2016.
Acquisition of the remaining interest in the AMH Group
In anticipation of the retirement of Mr Manny de Canha in January 2018 and in pursuit of inherent operational efficiencies and synergies that exist within
Imperial’s two vehicle divisions, Imperial has entered into an agreement to acquire Mr de Canha’s indirectly owned 10% share of the AMH Group held via a
holding company (“the Transaction”). Imperial currently has a 90% shareholding in AMH Group and if the Transaction is successfully implemented, AMH Group
will become a wholly owned subsidiary of Imperial.
Mr de Canha is the Chief Executive Officer of the AMH Group and an executive director of Imperial Holdings Limited therefore due to its size in comparison to the market
capitalisation and in terms of JSE Listings Requirements the Transaction is classified as a small related party transaction.
It is the express intent of Imperial and Mr de Canha that he should remain highly invested in the Imperial Group, and remain a director thereof.
To this end the purchase consideration will insofar as possible be discharged by means of an exchange of Imperial shares.
The salient terms of the Transaction are as follows:
- The AMH Group comprises Associated Motor Holdings (Pty) Ltd and Boundless Trade 154 (Pty) Ltd ("the South African shares"), Associated Motors Australia
(Pty) Ltd ("the Australian shares"), Automotive Distributors Africa Limited ("the Rest of Africa shares") collectively the ("AMH Group"). These companies
have been reported on in Imperial's segmental accounts as the Vehicle Import, Distribution and Dealerships division and the Motor Related Financial
Products and Services division
- The consideration, which shall be discharged on the effective date, will in value be equivalent to R750m (seven hundred and fifty million Rand)
comprising:
- R650m (six hundred and fifty million Rand) discharged by means of the issue of Imperial shares for the South African shares, if so approved by Imperial
shareholders within 75 days of the date of this SENS Announcement by way of a Special Resolution pursuant to Section 41(1) (b) of the Companies Act
71 of 2008. The number of shares will be determined by dividing R650m by the weighted average price of an Imperial share in the 45 days prior to the
effective date. If for any reason shareholder approval has not been received within 75 days and the conditions precedent have been met, this portion
of the purchase price will be discharged in cash by the Imperial Group; and
- the balance of R100m (one hundred million Rand) will be discharged in cash for the Rest of Africa shares and the Australian shares.
- PricewaterhouseCoopers Corporate Finance (Pty) Ltd, an independent professional expert acceptable to the JSE, has been appointed to provide a fairness
opinion and advise the relevant Boards of the Imperial Group whether the Transaction is fair insofar as shareholders are concerned.
- The Transaction is subject to the following conditions precedent being met within 75 days of the date of this SENS Announcement:
- Compliance by Imperial with the provisions of section 10.7 of the Listings Requirements in respect of small related party transactions;
- Approval by shareholders in terms of Section 41(1)(a) and (b) of the Companies Act; and
- Any other regulatory approvals.
- The effective date will be the day on which the conditions precedent are met.
Planning of the strategies, structures, systems and processes necessary to enhance the value of Imperial's total vehicle interests will commence immediately,
to a staged implementation and realisation of benefits commencing on 1st July 2016. As an Imperial board member, Mr de Canha's experience and expertise will
be referenced to prioritise projects and mitigate risk in this process.
It is important to stress that Imperial is fully committed to preserving the independence of the Original Equipment Manufacturers and International Brands for
whom we act as motor vehicle distributors and retailers. Any restructuring pursuant to this transaction will in no way infringe on our contractual commitments,
compromise our obligations,or test the valued relationships with the OEM's and Brands that Imperial and its subsidiaries have developed over decades.
From 1st July 2016 Imperial's vehicle businesses, which generated combined revenues and operating profits of R35,38 billion and R1,33 billion respectively
during the F1 2016,will be reported on as a single entity with due regard to the disclosures and transparency necessary to facilitate understanding and insight
for shareholders.
A circular regarding the AMH Group acquisition will be distributed to shareholders in due course.
Please refer to the relevant cautionary announcement at the end of this statement.
Group financial performance
Profit and loss
Group profit and loss (including discontinued operations)
% change
HY1 HY1 % HY2 on HY2
2015 2016 change 2015 2015
Revenue (Rm) 56 234 59 766 6 54 253 10
Operating profit (Rm) 2 872 3 066 7 3 363 (9)
Operating margin (%) 5,1 5,1 6,2
Return on Invested Capital (%) 11,9 11,6
Weighted average cost of capital (%) 9,1 8,7
Group profit and loss (Excluding discontinued operations)
% change
HY1 HY1 % HY2 on HY2
2015 2016 change 2015 2015
Revenue (Rm) 54 764 58 201 6 52 689 10
Operating profit (Rm) 2 692 2 792 4 2 979 (6)
Operating margin (%) 4,9 4,8 5,7
Revenue increased by 6% to R59,8 billion (4% up excluding acquisitions). Revenue for continuing operations, excluding Regent, increased 6%
to R58,2 billion.
Operating profit increased 7% to R3,1 billion (4% up excluding acquisitions). Operating profit from continuing operations, excluding Regent, was R2,8 billion,
up 4%. The increases in revenue and operating profit were enhanced by the inclusion of the Imres and S&B Commercials acquisitions for the full six months.
Group operating margin, including Regent, was maintained at 5,1%.
Net finance costs increased by 9% compared to the prior period on the back of increased debt levels and interest rates. Increase in debt is due to additional
working capital, capital expenditure, higher tax and interest payments, translation of the foreign debt into Rand, and acquisitions and disposals.
Income from associates and joint ventures increased by R46 million on the prior period mainly attributable to Ukhamba and MiX Telematics, in which
Imperial holds a 25,3% shareholding.
The effective tax rate of 28,6% increased from 26,2% in the prior period mainly due to the goodwill impairments which are not tax deductible.
Earnings per share
H1 H1 %
2016 2015 Change
Basic EPS (cents) 881 738 19
Diluted EPS (cents) 869 736 18
Basic HEPS (cents) 801 759 6
Diluted HEPS (cents) 791 756 5
Basic Core EPS (cents) 861 803 7
Diluted Core EPS (cents) 849 800 6
Reconciliation from Earnings to Headline and Core Earnings:
H1 H1 %
R million 2016 2015 change
Net profit attributable to Imperial shareholders (earnings) 1 699 1 426 19
Profit on disposal of assets (41) (15)
Impairments of goodwill and other assets 303 33
Profit on sale of businesses (445) 11
Other 10 17
Tax effects of re-measurements 85 (1)
Non-controlling interest (66) (5)
Headline earnings 1 545 1 466 5
Amortisation of intangibles 207 205
Foreign exchange gain on intergroup monetary items (92) (104)
Re-measurement of contingent consideration, put option liabilities and business acquisition costs 36 29
Change in economic assumptions on insurance funds 18 (1)
Tax effects (35) (28)
Non-controlling interest (19) (15)
Core earnings 1 660 1 552 7
Profit attributable to shareholders increased by 19% from R1,4 billion in the prior period to R1,7 billion. The net increase was largely as a result of an
increase in operating profit of R194 million and a profit of R447 million recognised on the disposal of Neska, reduced by impairments of goodwill and other
intangibles of R303 million.
Financial position
H1 H2 %
R million 2016 2015 change
Goodwill and intangible assets 7 866 7 193 9
Property, plant and equipment 11 736 10 967 7
Investment in associates and joint ventures 1 618 1 351
Transport fleet 6 372 5 610 14
Vehicles for hire 3 841 3 603
Investments and loans 357 357
Net working capital 11 475 9 267 24
Other assets 1 597 1 428
Assets classified as held for sale 6 530 4 618
Net debt (17 709) (13 886) 28
Non-redeemable non-participating preference shares (441) (441)
Other liabilities (8 808) (8 121)
Liabilities directly associated with assets classified as held for sale (3 243) (2 713)
Total shareholders' equity 21 191 19 233 10
Total assets 74 863 65 712 14
Total liabilities 53 672 46 479 15
Goodwill and intangible assets rose to R7,9 billion as a result of Rand weakness and acquisitions.
Property plant and equipment increased by R769 million to R11,7 billion due mainly to investments in properties.
The transport fleet increased by R762 million mainly due to investment in trucks and barges of R505 million, currency adjustments of R632 million resulting
from a weaker Rand, reduced by depreciation of R396 million.
Vehicles for hire increased by R238 million. Vehicles rented to companies outside the group increased by R665 million. Imperial Car Rental increased its fleet
by R269 million ahead of its peak season. The additions to vehicles for hire were offset by the reclassification of Goscor and Bobcat's rental assets of R696
million to assets held for sale. Price increases have contributed further to the increase in vehicles for hire.
Net working capital increased by 24% to R11,5 billion compared to R9,3 billion at June 2015, largely as a result of the increase in trade receivables and
inventory. OEM discounts created incentive for the vehicle importers to increase inventory.
Total assets increased by 14% to R74,9 billion due mainly to acquisitions, capital expenditure and currency adjustments.
Net debt to equity (including preference shares as equity and including Regent's cash resources) at 76% (Dec 2014: 79%) was higher than the 66% at June
2015 due to additional working capital, capital expenditure, higher tax and interest payments, translation of the foreign debt into Rand and acquisitions.
The net debt level is within the target gearing range of 60% to 80%. The net debt to EBITDA ratio (rolling 12 months basis) was 1.8 times (2014:
1.8 times).
In addition to attributable profits, shareholders' equity was positively impacted by: the weakening of the Rand against the Euro which resulted in a gain on
foreign currency translation reserve of R 814 million; and a hedging reserve of R403 million as a result of the weakening Rand.
Cash flow
H1 H1 %
R million 2016 2015 change
Cash generated by operations before movements in working capital 4 485 4 357 3
Movements in net working capital (excludes currency movements & net acquisitions) (1 194) (1 069)
Cash generated by operations before capital expenditure on rental assets 3 291 3 288 -
Capital expenditure on rental assets (including Goscor) (1 561) (1 348)
Interest paid (696) (580)
Tax paid (945) (451)
Cash flows from operating activities 89 909 (90)
Net proceeds from sale of businesses (net of acquisitions) 726 (905)
Capital expenditure (non-rental assets) (1 501) (1 417)
Equities, investments and loans (43) (972)
Dividends paid (1 030) (917)
Other (550) (206)
Increase in net debt (excludes currency movements & net acquisitions) (2 309) (3 508) (34)
Cash generated by operations before capital expenditure on rental assets was R3,3 billion, unchanged on the prior period. After interest, tax payments and
capital expenditure on rental assets, net cash flow from operating activities decreased to R89 million from R909 million in the prior period.
Capital expenditure on rental assets of R1,6 billion includes R140 million spent at Goscor which was sold in February 2016.
The main contributors to the net R726 million proceeds from sale of businesses (net of acquisitions) were the disposal of Neska, two dealerships and two
panel shop outlets.
Outflows from equities, investments and loans amounted to R43 million, down from R972 million in 2014 due to the decision to decrease exposure to
equities in the Regent portfolio.
Dividends amounting to R1,0 billion were paid during the period.
Liquidity
The Group's liquidity position is strong with R8,5 billion in unutilised facilities (excluding asset based finance facilities). Fixed rate debt represents 41% of
total debt and 71% is of a long term nature. The Group's credit rating as determined by Moody's was unchanged at Baa3 with a stable outlook.
Dividend
An interim cash dividend of 370 cents per ordinary share (2014: 350 cents per share) has been declared.
Board changes
As announced on 25 August 2015, Dr Suresh Kana, recent past Chief Executive Officer of PwC, was appointed as independent non-executive director of
Imperial Holdings Limited from the 1st September 2015 and as Chairman of the board from the 3rd November 2015.
Mr. Moses Kgosana, a highly regarded member of the accounting profession, who established and later merged his own firm with KPMG where in recent
years he served as Chief Executive and Senior Partner, was appointed as an independent non-executive director and chairperson of the Audit Committee
from the 1st September 2015.
On the 3rd November 2015, Mr Roddy Sparks, who has served as a director since August 2006, was appointed Lead Independent Director.
Prospects
The performance and volatility of commodity, equity and bond markets since the start of 2016 is cause for concern as a reflection of general uncertainty
about the performance of economies worldwide. While there is no panacea for South Africa's economic recovery we are encouraged by government's more
recent engagements with business. Imperial will continue to participate in and contribute to dialogue that results in economic growth and decisive action to
avoid a rating downgrade and recession.
There is no reason to anticipate an improvement in the trading conditions facing Imperial during 2016. We expect volume growth throughout our logistics
operations to be subdued, and national new vehicle sales in South Africa to decline between 5% and 10% in response to fragile consumer confidence and
rising interest rates.
Despite a pleasing start to the second half we therefore anticipate single digit revenue growth and unchanged operating profit in continuing operations
for the year to June 2016.
We will continue to execute on our espoused strategies.
Mark J. Lamberti - Chief Executive Officer
Osman S. Arbee - Chief Financial Officer
The forecast financial information herein has not been reviewed or reported on by Imperial's auditors.
Cautionary announcement
With regards to the valuation of the AMH Group, a further announcement will be published upon receipt of the fairness opinion.
Until then shareholders should exercise caution when dealing in Imperial's securities.
Declaration of preference and ordinary dividends
for the six months ended 31 December 2015
Preference shareholders
Notice is hereby given that a gross interim preference dividend of 3.9340068 cents per preference share has been declared payable to holders of non-
redeemable, non-participating preference shares. The dividend will be paid out of reserves.
The preference dividend will be subject to a local dividend tax rate of 15%. The net preference dividend, to those shareholders who are not exempt from
paying dividend tax, is therefore 3.3439058 cents per share.
Ordinary shareholders
A further notice is hereby given that a gross interim ordinary dividend in the amount of 370 cents per ordinary share has been declared payable to holders
of ordinary shares. The dividend will be paid out of reserves.
The ordinary dividend will be subject to a local dividend tax rate of 15%. The net ordinary dividend, to those shareholders who are not exempt from paying
dividend tax, is therefore 314.50 cents per share.
The company has determined the following salient dates for the payment of the preference dividend and ordinary dividend:
2016
Last day for preference shares and ordinary shares respectively to trade cum-preference
dividend and cum ordinary dividend Wednesday, 16 March
Preference and ordinary shares commence trading ex-preference dividend and ex-ordinary
dividend respectively Thursday,17 March
Record date Thursday, 24 March
Payment date Tuesday, 29 March
The company's income tax number is 9825178719.
The number of preference shares in issue at the date of declaration was 4 540 041.
The number of ordinary shares in issue at the date of the declaration was 202 782 278.
Share certificates may not be dematerialised/rematerialized between Thursday, 17 March 2016 and Thursday, 24 March 2016, both days inclusive.
On Tuesday, 29 March 2016, amounts due in respect of the preference dividend and the ordinary dividend will be electronically transferred to the bank
accounts of certificated shareholders that utilise this facility. In respect of those who do not, cheques dated 29 March 2016 will be posted on or about that
date. Shareholders who have dematerialised their shares will have their accounts, held at their CSDP or Broker, credited on Tuesday, 29 March 2016.
On behalf of the board
RA Venter
Group Company Secretary
22 February 2016
Continuing and discontinued operations
The results of the Insurance business, which is in the process of being disposed, are presented in the condensed consolidated statement of profit or loss as
discontinued operations. The comparative profit or loss has been re-presented accordingly. The assets and related liabilities of the Insurance businesses has
been reclassified to 'Assets of discontinued operations' and 'Liabilities of discontinued operations' respectively on the condensed consolidated statement of
financial position. The assets and related liabilities of the Goscor disposal group has been reclassified to 'Assets of disposal group' and 'Liabilities of disposal
group' respectively on the condensed consolidated statement of financial position.
The following shows the combined result of the continued and discontinued operations after eliminating inter-group transactions. The results of the Goscor
disposal group is included under continuing operations.
Total Continuing Discontinued Total Continuing Discontinued
operations operations operations operations operations operations
31 December 31 December 31 December 31 December 31 December 31 December
% 2015 2015 2015 2014* 2014* 2014
change Rm Rm Rm Rm Rm Rm
Revenue 6 59 766 58 201 1 565 56 234 54 764 1 470
Net operating expenses (55 374) (54 083) (1 291) (52 126) (50 849) (1 277)
Profit from operations before
depreciation and recoupments 4 392 4 118 274 4 108 3 915 193
Depreciation, amortisation,
impairments and recoupments (1 326) (1 326) (1 236) (1 223) (13)
Operating profit 7 3 066 2 792 274 2 872 2 692 180
Recoupments from sale of
properties, net of impairments 6 6 12 12
Amortisation and impairment of
intangible assets arising on business
combinations (358) (358) (205) (205)
Other non-operating items 354 383 (29) 63 62 1
Profit before net finance costs 12 3 068 2 823 245 2 742 2 561 181
Net finance costs 9 (651) (651) (598) (598)
Profit before share of result of
associates and joint ventures 2 417 2 172 245 2 144 1 963 181
Share of result of associates and
joint ventures 58 58 12 12
Profit before tax 15 2 475 2 230 245 2 156 1 975 181
Income tax expense (692) (615) (77) (562) (498) (64)
Profit for the period 12 1 783 1 615 168 1 594 1 477 117
Net profit attributable to:
Owners of Imperial 19 1 699 1 558 141 1 426 1 331 95
Non-controlling interests (50) 84 57 27 168 146 22
1 783 1 615 168 1 594 1 477 117
Earnings per share (cents)
- Basic 19 881 808 73 738 689 49
- Diluted 18 869 798 71 736 688 48
Headline earnings per share (cents)
- Basic 6 801 728 73 759 710 49
- Diluted 5 791 720 71 756 708 48
Core earnings per share (cents)
- Basic 7 861 781 80 803 754 49
- Diluted 6 849 771 78 800 752 48
* After restating for the change in accounting policy as described in note 2.1
The major classes of assets and liabilities of the discontinued operations were as follows:
31 December 30 June
2015 2015
Rm Rm
Assets
Goodwill and intangible assets 167 122
Investment in associates and joint ventures 13 17
Property, plant and equipment 160 146
Income tax assets 20 20
Investments and other financial assets 3 148 3 250
Trade and other receivables 215 218
Cash resources 1 140 845
Assets of discontinued operations 4 863 4 618
Liabilities
Insurance and investment contracts 1 435 1 361
Income tax liabilities 207 197
Trade payables and provisions 1 095 1 155
Liabilities of discontinued operations 2 737 2 713
Investments and other financial assets consists of:
Listed investments at fair value (level 1) 2 441 2 288
Fixed and negotiable deposits at fair value (level 2) 589 733
Reinsurance receivables at amortised cost 118 229
3 148 3 250
The cash flows from discontinued operations were as follows:
Cash flows from operating activities 159 201
Cash flows from investing activities 103 (663)
Cash flows from financing activities (9) (7)
Condensed consolidated statement of profit or loss
for the six months ended 31 December 2015
Unaudited Unaudited Audited
Six months Six months Financial year
ended ended ended
31 December 31 December 30 June
% 2015 2014* 2015
Notes change Rm Rm Rm
CONTINUING OPERATIONS
Revenue 6 58 201 54 764 107 453
Net operating expenses (54 083) (50 849) (99 290)
Profit from operations before depreciation and recoupments 4 118 3 915 8 163
Depreciation, amortisation, impairments and recoupments (1 326) (1 223) (2 492)
Operating profit 4 2 792 2 692 5 671
Recoupments from sale of properties, net of impairments 6 12 29
Amortisation and impairment of intangible assets arising on
business combinations (358) (205) (415)
Other non-operating items 6 383 62 (80)
Profit before net finance costs 10 2 823 2 561 5 205
Net finance costs 7 9 (651) (598) (1 194)
Profit before share of result of associates and joint ventures 2 172 1 963 4 011
Share of result of associates and joint ventures 58 12 33
Profit before tax 13 2 230 1 975 4 044
Income tax expense (615) (498) (1 035)
Profit for the period from continuing operations 9 1 615 1 477 3 009
DISCONTINUED OPERATIONS
Profit for the period from discontinued operations 168 117 377
Net profit for the period 12 1 783 1 594 3 386
Net profit attributable to:
Owners of Imperial 1 699 1 426 3 054
- Continuing operations 1 558 1 331 2 735
- Discontinued operations 141 95 319
Non-controlling interests 84 168 332
- Continuing operations 57 146 274
- Discontinued operations 27 22 58
1 783 1 594 3 386
Earnings per share (cents)
Continuing operations
- Basic 17 808 689 1 416
- Diluted 16 798 688 1 406
Discontinued operations
- Basic 49 73 49 166
- Diluted 48 71 48 162
Total operations
- Basic 19 881 738 1 582
- Diluted 18 869 736 1 568
* Restated for change in accounting policy as described in note 2.1 and represented for continued and discontinued operations. To view the
results of total operations refer above.
Condensed consolidated statement of comprehensive income
for the six months ended 31 December 2015
Unaudited Unaudited Audited
Six months Six months Financial year
ended ended ended
31 December 31 December 30 June
2015 2014 2015
Rm Rm Rm
Net profit for the period 1 783 1 594 3 386
Other comprehensive income 1 387 (322) (268)
Items that may be reclassified subsequently to profit or loss 1 387 (182) (172)
Exchange gains (losses) arising on translation of foreign operations 909 (227) (312)
Share of associates' and joint ventures' movement in foreign currency translation reserve 18 5 8
Movement in valuation reserve (8) (87)
Reclassification of (loss) gain on disposal of available-for-sale investment (1) 43
Movement in hedge accounting reserve 463 50 175
Income tax relating to items that may be reclassified to profit or loss (3) (1) 1
Items that will not be reclassified to profit or loss (140) (96)
Remeasurement of defined benefit obligations (202) (137)
Income tax on remeasurement of defined benefit obligations 62 41
Total comprehensive income for the period 3 170 1 272 3 118
Total comprehensive income attributable to:
Owners of Imperial 2 915 1 091 2 762
Non-controlling interests 255 181 356
3 170 1 272 3 118
Earnings per share information
for the six months ended 31 December 2015
Unaudited Unaudited Audited
Six months Six months Financial year
ended ended ended
31 December 31 December 30 June
% 2015 2014 2015
change Rm Rm Rm
Headline earnings reconciliation
Earnings - basic 19 1 699 1 426 3 054
Saving of finance costs by associate on potential sale of Imperial shares 21 29 44
Earnings - diluted 1 720 1 455 3 098
Recoupment for disposal of property, plant and equipment (IAS 16) (40) (15) (85)
Recoupment for disposal of intangible assets (IAS 38) (1)
Impairment of property, plant and equipment (IAS 36) 17 28
Impairment of intangible assets (IAS 36) 151
Impairment of goodwill (IAS 36) 152 16 67
Impairment (profit) on disposal of investments in associates and joint ventures (IAS 28) 2 (2)
(Profit) loss on disposal of subsidiaries and businesses (IFRS 10) (447) 11 (15)
Reclassification of (gain) loss on disposal of available-for-sale investment (IAS 39) (1) 43
Remeasurements included in share of result of associates and joint ventures 10 18 41
Tax effects of remeasurements 85 (1) 13
Non-controlling interests share of remeasurements (66) (5) (9)
Headline earnings - diluted 1 566 1 495 3 179
Saving of finance costs by associate on potential sale of Imperial shares (21) (29) (44)
Headline earnings - basic 5 1 545 1 466 3 135
Headline earnings per share (cents)
Continuing operations
- Basic 3 728 710 1 458
- Diluted 2 720 708 1 446
Discontinued operations
- Basic 49 73 49 166
- Diluted 48 71 48 163
Total operations
- Basic 6 801 759 1 624
- Diluted 5 791 756 1 609
Core earnings reconciliation
Headline earnings - basic 5 1 545 1 466 3 135
Saving of finance costs by associate on potential sale of Imperial shares 21 29 44
Headline earnings - diluted 5 1 566 1 495 3 179
Amortisation of intangible assets arising on business combinations 207 205 415
Foreign exchange gain on inter-group monetary item (92) (104) (104)
Business acquisition costs 3 12 16
Remeasurement of contingent consideration and put option liabilities 33 17 47
Change in economic assumptions on insurance funds 18 (1) 6
Tax effects of core earnings adjustments (35) (28) (85)
Non-controlling interests share of core earnings adjustments (19) (15) (43)
Core earnings - diluted 6 1 681 1 581 3 431
Saving of finance costs by associate on potential sale of Imperial shares (21) (29) (44)
Core earning - basic 7 1 660 1 552 3 387
Unaudited Unaudited Audited
Six months Six months Financial year
ended ended ended
31 December 31 December 30 June
% 2015 2014 2015
change Rm Rm Rm
Core earnings per share (cents)
Continuing operations
- Basic 4 781 754 1 586
- Diluted 3 771 752 1 571
Discontinued operations
- Basic 63 80 49 168
- Diluted 63 78 48 165
Total operations
- Basic 7 861 803 1 754
- Diluted 6 849 800 1 736
Additional information
Net asset value per share (cents) 16 10 635 9 204 9 696
Dividend per ordinary share (cents) 6 370 350 795
Number of ordinary shares in issue (million)
- total shares 202,8 207,8 202,8
- net of shares repurchased 194,2 193,8 194,6
- weighted average for basic 192,8 193,2 193,1
- weighted average for diluted 198,0 197,7 197,6
Number of other shares (million)
- Deferred ordinary shares to convert into ordinary shares 8,3 9,1 8,3
Condensed Consolidated Statement Of Financial Position
At 31 December 2015
Unaudited Restated Restated
31 December 31 December 30 June
2015 2014* 2015*
Note Rm Rm Rm
ASSETS
Goodwill and intangible assets 8 7 866 7 397 7 193
Investment in associates and joint ventures 1 618 1 392 1 351
Property, plant and equipment 11 736 10 746 10 967
Transport fleet 6 372 5 513 5 610
Deferred tax assets 1 245 1 290 1 097
Investments and loans 357 3 102 357
Other financial assets 30 294 36
Vehicles for hire 3 841 3 875 3 603
Inventories 17 815 14 115 15 465
Tax in advance 322 264 295
Trade and other receivables 14 391 13 470 12 849
Cash resources 2 740 2 620 2 271
Assets of discontinued operations 4 863 4 618
Assets of disposal group** 1 667
Total assets 74 863 64 078 65 712
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share premium 382 382 382
Shares repurchased (742) (276) (668)
Other reserves 2 036 1 053 1 089
Retained earnings 18 977 16 678 18 065
Attributable to owners of Imperial 20 653 17 837 18 868
Put arrangement over non-controlling interests (1 188) (1 391) (1 473)
Non-controlling interests 1 726 1 816 1 838
Total equity 21 191 18 262 19 233
Liabilities
Non-redeemable, non-participating preference shares 441 441 441
Retirement benefit obligations 1 369 1 261 1 157
Interest-bearing borrowings 20 449 17 322 16 157
Insurance, investment, maintenance and warranty contracts 3 229 4 497 3 191
Deferred tax liabilities 1 069 1 513 1 193
Other financial liabilities 2 438 1 914 2 019
Trade, other payables and provisions 20 731 18 090 19 047
Current tax liabilities 703 778 561
Liabilities of discontinued operations 2 737 2 713
Liabilities of disposal group** 506
Total liabilities 53 672 45 816 46 479
Total equity and liabilities 74 863 64 078 65 712
* Restated for the application of the change in accounting policy (see note 2.1). The original 30 June 2015 amounts were audited, the 31 December 2014
amounts and the restatements have not been audited
** Assets and liabilities relating to the Goscor disposal group. The results of the Goscor disposal group is included in the results of continuing operations
Condensed consolidated statement of cash flows
for the six months ended 31 December 2015
Unaudited Restated Restated
Six months Six months Financial year
ended ended ended
31 December 31 December 30 June
% 2015 2014* 2015*
Note change Rm Rm Rm
Cash flows from operating activities
Cash generated by operations before movements in net working capital 4 485 4 357 9 049
Movements in net working capital (1 194) (1 069) 9
Cash generated by operations before capital expenditure on rental
assets 3 291 3 288 9 058
Expansion capital expenditure - rental assets (504) (851) (772)
Net replacement capital expenditure - rental assets (1 057) (497) (759)
- Expenditure (2 330) (1 351) (2 496)
- Proceeds 1 273 854 1 737
Cash generated by operations (11) 1 730 1 940 7 527
Net finance cost paid (696) (580) (1 180)
Tax paid (945) (451) (1 301)
(90) 89 909 5 046
Cash flows from investing activities
Net disposals (acquisitions) of subsidiaries and businesses 726 (905) (938)
Expansion capital expenditure - excluding rental assets (917) (806) (1 743)
Net replacement capital expenditure - excluding rental assets (584) (611) (1 245)
Net movement in associates and joint ventures (114) 25 178
Net movement in investments, loans and other financial instruments 71 (997) (1 203)
(818) (3 294) (4 951)
Cash flows from financing activities
Hedge cost premium paid (145) (118) (128)
Ordinary shares repurchased (74) (56) (56)
Dividends paid (1 030) (917) (1 724)
Change in non-controlling interests (355) (32) (90)
Capital raised from non-controlling interests 24 1
Net increase in other interest-bearing borrowings 1 071 1 659 831
(509) 536 (1 166)
Net decrease in cash and cash equivalents (1 238) (1 849) (1 071)
Effects of exchange rate changes on cash resources in foreign currencies 314 (6) 7
Cash and cash equivalents at beginning of period 38 1 102 1 102
Cash and cash equivalents at end of period 9 (18) (886) (753) 38
* Restated for the application of the change in accounting policy (see note 2.1). The original 30 June 2015 amounts were audited, the 31
December 2014 amounts and the restatements have not been audited
Condensed consolidated statement of changes in equity
for the six months ended 31 December 2015
Put
Share arrangement
capital Attributable over Non-
and share Shares Other Retained to owners non-controlling controlling Total
premium re-purchased reserves earnings of Imperial interests interests equity
Rm Rm Rm Rm Rm Rm Rm Rm
At 30 June 2014 - Audited 382 (220) 1 149 16 229 17 540 (1 000) 1 569 18 109
Total comprehensive income for the period (195) 1 286 1 091 181 1 272
Net attributable profit for the period 1 426 1 426 168 1 594
Other comprehensive income (195) (140) (335) 13 (322)
Movement in statutory reserves 19 (19)
Share-based cost charged to profit or loss 65 65 2 67
Share-based equity reserve transferred to retained earnings on vesting 14 (14)
Share-based equity reserve hedge cost refund 11 11 (3) 8
Ordinary dividend paid (804) (804) (804)
Repurchase of 320 000 ordinary shares from the open market at an average price of R172,68 per share (56) (56) (56)
Initial recognition of put option written over non-controlling interests (391) (391)
Share of changes in net assets of associates and joint ventures (2) (2) (2)
Non-controlling interests acquired 206 206
Net decrease in non-controlling interests though buy-outs (8) (8) (26) (34)
Non-controlling interests share of dividends (113) (113)
At 31 December 2014 - Unaudited 382 (276) 1 053 16 678 17 837 (1 391) 1 816 18 262
Total comprehensive income for the period (4) 1 675 1 671 175 1 846
Net attributable profit for the period 1 628 1 628 164 1 792
Other comprehensive income (4) 47 43 11 54
Movement in statutory reserves 20 (20)
Share-based cost charged to profit or loss 61 61 2 63
Share-based equity reserve transferred to retained earnings on vesting (7) 7
Share-based equity reserve hedge utilisation (4) (4) (4)
Ordinary dividend paid (667) (667) (667)
Initial recognition of put option written over non-controlling interest (82) (82)
Cancellation of 5 864 944 ordinary shares held by Lereko Mobility 665 (665)
Reallocation of prior year surplus on shares cancelled (1 057) 1 057
Share of changes in net assets of associates and joint ventures (3) (3) (3)
Realisation on disposal of subsidiaries 12 12 12
Non-controlling interests acquired, net of disposals and shares issued 2 2
Net decrease in non-controlling interests through buy-outs (39) (39) (17) (56)
Non-controlling interests share of dividends (140) (140)
At 30 June 2015 - Audited 382 (668) 1 089 18 065 18 868 (1 473) 1 838 19 233
Total comprehensive income for the period 1 216 1 699 2 915 255 3 170
Net attributable profit for the period 1 699 1 699 84 1 783
Other comprehensive income 1 216 1 216 171 1 387
Movement in statutory reserves 7 (7)
Share-based cost charged to profit or loss 71 71 2 73
Share-based equity reserve transferred to retained earnings (60) 60
Share-based equity reserve hedge cost utilisation (128) (128) (4) (132)
Ordinary dividend paid (840) (840) (840)
Repurchase of 438 300 ordinary shares from the open market at an average price of R169,48 per share (74) (74) (74)
Realisation on disposal of subsidiaries 17 17 17
Non-controlling interests acquired, net of disposals and shares issued 4 4
Net decrease in non-controlling interests through buy-outs (176) (176) 285 (179) (70)
Non-controlling interests share of dividends (190) (190)
At 31 December 2015 - Unaudited 382 (742) 2 036 18 977 20 653 (1 188) 1 726 21 191
Notes to the condensed consolidated financial statements
for the six months ended 31 December 2015
1. Basis of preparation
The condensed consolidated financial statements have been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS) and its Interpretations adopted by the International Accounting Standards Board (IASB)
in issue and effective for the Group at 31 December 2015 and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and financial reporting pronouncements as issued by the Financial Reporting Standards Council. The results are presented in
accordance with IAS 34 - Interim Financial Reporting and comply with the Listings Requirements of the Johannesburg Stock Exchange
Limited and the Companies Act of South Africa, 2008. These condensed consolidated financial statements do not include all the
information required for full annual financial statements and should be read in conjunction with the consolidated annual financial
statements as at and for the year ended 30 June 2015.
These condensed consolidated financial statements have been prepared under the supervision of R Mumford, CA (SA) and were approved
by the board of directors on 22 February 2016.
2. Accounting policies
The accounting policies adopted and methods of computation used in the preparation of the condensed consolidated financial statements
are in accordance with IFRS and are consistent with those of the annual financial statements for the year ended 30 June 2015.
2.1 Change in accounting policy
Vehicles held under buy-back arrangements
In the prior year the Group changed its accounting policy for vehicles held under buy-back arrangements. The change in the accounting
policy resulted in a reallocation between line items on the statement of profit or loss, the statement of financial position and the
statement of cashflows without affecting operating profit, total assets or cash generated by operations.
Floorplans
During the current reporting period the Group decided to reclassify its interest-bearing trade payables, payable to vehicle suppliers, from
interest-bearing borrowings to trade and other payables. As the interest-bearing amounts are a short-term credit line received from our
vehicles suppliers to acquire vehicles as inventory it is considered more appropriate to show them as trade payables.
The impact of the above changes in policy on the 31 December 2014 and 30 June 2015 financial statements were as follows:
31 December 30 June
2014 2015
Statement of financial position Rm Rm
Increase in vehicles for hire 1 082
Decrease in inventory (1 082)
Total assets
Interest-bearing borrowings (407) (607)
Trade, other payables and provisions 407 607
Total liabilities
Statement of profit or loss
Continuing operations
Decrease in net operating expenses 100
Increase in profit from operations before depreciation and recoupments 100
Increase in depreciation, amortisation, impairments and recoupments (100)
Operating profit
31 December 30 June
2014 2015
Statement of cash flows Rm Rm
Cash flows from operating activities
Increase in cash generated by operations before movements in working capital 100
Decrease in movements in net working capital 336 59
Increase in cash generated by operations before capital expenditure on rental assets 436 59
Increase in expansion capital expenditure - rental assets (445)
Increase in net replacement capital expenditure - rental assets (95)
- Increase in expenditure (466)
- Increase in proceeds 371
(104) 59
Cash flows from financing activities
Net increase in other interest-bearing borrowings 307 344
307 344
Net increase in cash and cash equivalents 203 403
Increase in cash and cash equivalents at beginning of period 204 204
Increase in cash and cash equivalents at end of period 407 607
2.2 Restatement of the segmental information
The segmental information has been restated to reflect the profit or loss for continuing operations only by excluding the Insurance
segment, for the changes in accounting policies as described in note 2.1 and for the reallocation of the UK head office out of Head-Office
and Eliminations to the Vehicles Retail, Rental and After Market Parts segment.
The impact of the restatements were as follows:
Depreciation,
amortisation,
impairments
Operating and Net finance Pre-tax
Revenue profit recoupments costs profits
Segment profit or loss - 31 December 2014 Rm Rm Rm Rm Rm
Vehicle Import, Distribution and Dealerships
Previously stated 14 278 461 128 260 192
Restatement for vehicles for hire 144
As restated 14 278 461 272 260 192
Vehicle Retail, Rental and After Market Parts
Previously stated 18 726 791 335 145 650
Reallocation of UK head-office from Head Office and
Eliminations 10 7 2 5
As restated 18 736 798 337 150 650
Motor-related Financial Services and Products
Previously stated 658 258 51 (1) 269
Continued access to cell captive arrangements with
Regent 49 49
Associate classified as discontinued operations (2)
As restated 658 307 51 (1) 316
Operating Operating Net working Net Net capital
Segment financial position - 31 Deceember2014 Assets liabilities capital Debt expenditure
Rm Rm Rm Rm Rm
Vehicle Import, Distribution and Dealerships
Previously stated 14 338 4 130 5 829 5 484 273
Restated for vehicles for hire (983) 540
As restated 14 338 4 130 4 846 5 484 813
Vehicle Retail, Rental and After Market Parts
Previously stated 13 416 4 908 2 851 3 378 766
Restated for floorplans 407 (407) (407)
Reallocation of UK head-office from Head Office and
Eliminations 285 11 9 319 26
As restated 13 701 5 326 2 453 3 290 792
Segment financial position - 30 June 2015
Vehicle Retail, Rental and After Market Parts
Previously stated 13 702 5 263 2 707 3 089 844
Restated for floorplans 607 (607) (607)
As restated 13 702 5 870 2 100 2 482 844
3 New and revised International Financial Reporting Standards in issue but not yet effective
IFRS 16 Leases introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a
term of longer than 12 months. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased
asset and a lease liability representing its obligation to make lease payments. Depreciation is recognised on the right-of-use asset and
interest on the lease liability. In terms of lessor accounting, IFRS 16 substantially carries forward the requirements in IAS 17 and
accordingly a lessor continues to account for its leases as operating leases or finance leases. Issued in January 2016 this standard becomes
effective for annual reporting periods beginning on or after 1 January 2019.
Other standards that will become applicable to the group in future reporting periods includes IFRS 9 Financial Instruments (effective 1
January 2018) and IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018). The details of these standards was outlined
in the 30 June 2015 annual financial statements.
The group is in the process of assessing the impact of these standards on its consolidated financial statements.
4. New headline earnings circular
Circular 2/2015 Headline Earnings which was issued by the South African Institute of Chartered Acccountants (SAICA) in October 2015
replaces Circular 2/2013 Headline Earnings. The revisions contained in the new circular relate primarily to IFRS 9 Financial Instruments and
has had no impact on the way the Group computes headline earnings.
31 December 31 December 30 June
2015 2014 2015
5. Foreign exchange rates
The following major rates of exchange was used in the translation of the
Group's foreign operations:
SA Rand : Euro
- closing 16,79 14,06 13,55
- average 15,03 14,15 13,73
SA Rand: US Dollar
- closing 15,46 11,57 12,15
- average 13,62 10,98 11,44
Unaudited Unaudited Audited
31 December 31 December 30 June
2015 2014 2015
Rm Rm Rm
6. Other non-operating items
Remeasurement of financial instruments not held-for-trading 93 101 (15)
Foreign exchange gains on foreign currency monetary items 126 117 75
Charge for remeasurement of put option liabilities (32) (21) (49)
(Losses) gains on remeasurement of contingent consideration liabilities (1) 4 2
Reclassification of gain (loss) on disposal of available-for-sale investment 1 (43)
Capital items 290 (39) (65)
Impairment of goodwill (152) (16) (66)
(Impairment) profit on disposal of investments in associates and joint ventures (2) 2
Profit (loss) on disposal of subsidiaries and businesses 447 (11) 15
Business acquisition costs (3) (12) (16)
383 62 (80)
7. Net finance costs
Net interest paid (696) (580) (1 180)
Fair value gain (loss) on interest-rate swap instruments 45 (18) (14)
(651) (598) (1 194)
8. Goodwill and intangible assets
Goodwill
Cost 6 642 5 987 5 944
Accumulated impairment (1 078) (875) (926)
5 564 5 112 5 018
Carrying value at beginning of period 5 018 4 737 4 737
Net (disposal) acquisition of subsidiaries and businesses (111) 429 463
Impairment charge (152) (16) (67)
Reclassified to assets held for sale (53) (13)
Currency adjustment 862 (38) (102)
Carrying value at end of period 5 564 5 112 5 018
Intangible assets 2 302 2 285 2 175
Goodwill and intangible assets 7 866 7 397 7 193
Restated Restated Restated
31 December 31 December 30 June
2015 2014* 2015*
Rm Rm Rm
9. Cash and cash equivalents
Cash resources 2 740 2 620 2 271
Cash resources included in assets of discontinued operations and disposal
groups 1 211 845
Short-term loans and overdrafts (included in interest-bearing borrowings) (4 837) (3 373) (3 078)
(886) (753) 38
* Restated for the application of the change in accounting policy (see note 2.1). The original 30 June 2015 amounts were audited, the 31
December 2014 amounts and the restatements have not been audited.
10. Fair value of financial instruments
10.1 Fair values of financial assets and liabilities carried at amortised cost
The following table sets out instances where the carrying amount of financial liabilities, as recognised on the statement of financial
position, differ from their fair values.
Carrying Fair
value value*
31 December 2015 Rm Rm
Listed corporate bonds (included in interest-bearing borrowings) 5 342 5 237
Listed non-redeemable, non-participating preference shares 441 331
* Level 1 financial instrument
The fair values of the remainder of the Group's financial assets and financial liabilities approximate their carrying values.
10.2 Fair value hierarchy
The Group's financial instruments carried at fair value are classified in three categories defined as follows:
Level 1 financial instruments are those that are valued using unadjusted quoted prices in active markets for identical financial instruments.
Level 2 financial instruments are those valued using techniques based primarily on observable market data. Instruments in this category
are valued using quoted prices for similar instruments or identical instruments in markets which are not considered to be active; or
valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable
market data.
Level 3 financial instruments are those valued using techniques that incorporate information other than observable market data.
Instruments in this category have been valued using a valuation technique where at least one input, which could have a significant effect
on the instrument's valuation, is not based on observable market data.
The following table presents the valuation categories used in determining the fair values of financial instruments carried at fair value. For
assets and liabilities of the discontinued operations refer above.
Total Level 2 Level 3
31 December 2015 Rm Rm Rm
Financial assets carried at fair value
Interest-rate swap instruments (included in Other financial assets) 30 30
Foreign exchange contracts and other derivative instruments (included in
Trade and other receivables) 457 457
Financial liabilities carried at fair value
Put option liabilities (included in Other financial liabilities) 1 816 1 816
Contingent consideration liabilities (included in Other financial liabilities) 118 118
Swap instruments (included in Other financial liabilities) 336 336
Foreign exchange contracts (included in Trade, other payables and
provisions) 190 190
Transfers between hierarchy levels
The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change
has occurred. There were no transfers between the fair value hierarchies during the period.
10.3 Movements in level 3 financial instruments measured at fair value
The following table shows a reconciliation of the opening and closing balances of level 3 financial liabilities carried at fair value.
Contingent
Put option consideration
liabilities liabilities Total
Financial liabilities Rm Rm Rm
Carrying value at beginning of period 1 640 31 1 671
Derecognition directly in equity (285) (285)
Arising on acquisition of subsidiaries and businesses 91 91
Fair valued through profit or loss 32 1 33
Settlements (22) (22)
Currency adjustments 429 17 446
Carrying value at end of period 1 816 118 1 934
Level 3 sensitivity information
The fair values of the level 3 financial liabilities of R1 934 million were estimated by applying an income approach valuation method
including a present value discount technique . The fair value measurement is based on significant inputs that are not observable in the
market. Key assumptions used in the valuations includes the assumed probability of achieving profit targets and the discount rates
applied. The assumed profitabilities were based on historical performances but adjusted for expected growth.
The following table shows how the fair value of the level 3 financial liabilities as at 31 December 2015 would change if the significant
assumptions were to be replaced by a reasonable possible alternative.
Increase in Decrease in
Financial Valuation Key Carrying value liabilities liabilities
instruments technique assumption Rm Rm Rm
Put option liabilities Income approach Earnings growth 1 816 4 (127)
Contingent consideration liabilities Income approach Assumed profits 118 (11)
Unaudited Unaudited Audited
31 December 31 December 30 June
2015 2014 2015
Rm Rm Rm
11. Contingencies and commitments
Capital commitments 1 213 1 656 2 289
Contingent liabilities 457 306 405
12. Acquisitions and disposals during the period
Acquisitions
A number of businesses were acquired during the period. These businesses are individually and collectively immaterial in terms of size
and value. The total assets acquired was R312 million and total liabilities R180 million. The purchase consideration of R318 million
resulted in goodwill and other intangible assets of R217 million. From the dates of acquisition the businesses contributed revenue of R661
million and operating profit of R32 million. The initial accounting for the business combinations are incomplete and based on provisional
figures.
Disposals
The Group disposed of its 65% interest in Neska, a subsidiary of Imperial Logistics International BV. The pre-tax profit on disposal
amounted to R447 million and is included in 'Other non-operating items'.
13. Events after the reporting period
Disposal of Goscor
The disposal of Goscor was completed on 5 February 2016.
Dividend declaration
Shareholders are advised that a preference and an ordinary dividend has been declared by the board of Imperial on 22 February 2016.
For more details please refer to the dividend declaration above.
Segmental information
Vehicle Import, Vehicle Retail, Motor-related Head-Office
Continuing Logistics Logistics Distribution Rental and Financial Services and
operations Africa International and Dealerships After Market Parts and Products Eliminations
Segment profit or loss - 2015 2014^ 2015 2014 2015 2014 2015 2014^ 2015 2014^ 2015 2014^ 2015 2014^
Continuing operations Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Revenue 58 201 54 764 13 714 13 265 10 306 9 595 14 590 14 278 20 790 18 736 801 658 (2 000) (1 768)
- South Africa 33 744 34 599 7 733 8 073 12 151 12 454 15 060 15 182 801 658 (2 001) (1 768)
- Rest of Africa 6 843 5 443 5 981 5 184 793 192 68 67 1
- International 17 614 14 722 8 10 306 9 595 1 646 1 632 5 662 3 487
Operating profit 2 792 2 692 802 802 397 386 532 461 801 798 336 307 (76) (62)
- South Africa 1 829 1 904 410 511 468 422 685 720 336 307 (70) (56)
- Rest of Africa 446 315 392 294 34 2 20 19
- International 517 473 (3) 397 386 30 37 96 59 (6) (6)
Depreciation, amortisation, impairments
and recoupments 1 678 1 416 457 455 380 393 448 272 385 337 81 51 (73) (92)
- South Africa 1 088 830 309 317 436 264 336 292 81 51 (74) (94)
- Rest of Africa 163 147 148 138 4 1 11 7 1
- International 427 439 380 393 8 7 38 38 1 1
Net finance costs 651 598 233 202 89 92 275 260 168 150 (2) (1) (112) (105)
- South Africa 442 423 152 142 265 249 137 132 (2) (1) (110) (99)
- Rest of Africa 87 64 81 60 3 1 4 3 (1)
- International 122 111 89 92 7 10 27 15 (1) (6)
Pre-tax profits* 1 937 2 014 539 633 232 215 142 192 616 650 372 316 36 8
- South Africa 1 299 1 454 242 369 108 162 531 603 372 316 46 4
- Rest of Africa 324 286 297 267 11 3 16 15 1
- International 314 274 (3) 232 215 23 27 69 32 (10) 3
Additional segment information -
Continuing operations
Analysis of revenue by type
- Sale of goods 35 336 32 531 5 081 4 309 12 354 12 086 17 902 16 137 (1) (1)
- Rendering of services 22 865 22 233 8 585 8 845 10 306 9 590 1 156 1 259** 2 475 2 282 332 255 11 2
58 201 54 764 13 666 13 154 10 306 9 590 13 510 13 345 20 377 18 419 332 255 10 1
Inter-group revenue 48 111 5 1 080 933** 413 317 469 403 (2 010) (1 769)
58 201 54 764 13 714 13 265 10 306 9 595 14 590 14 278 20 790 18 736 801 658 (2 000) (1 768)
Analysis of depreciation, amortisation,
impairment and recoupments 1 678 1 416 457 455 380 393 448 272 385 337 81 51 (73) (92)
- Depreciation and amortisation 1 361 1 209 367 362 307 294 335 272 336 324 81 51 (65) (94)
- Recoupments and impairments (41) 2 (18) (9) (15) 6 (2) (7) 3 1 2
- Amortisation and impairment of
intangible assets arising on business
combinations 358 205 108 102 88 93 115 56 10 (9)
Share of result of associates and joint
ventures included in pre-tax profits 58 12 16 21 13 8 (13) (3) 24 14 38 9 (20) (37)
^ Restated as described in note 2.1 and 2.2
* Defined in the glossary of terms
** The 2014 revenue split has a misallocation between 'Rendering of services' and 'Inter-group revenue' of R68 million.
The revised figures are: - Rendering of services - R1 191 million
- Inter-group revenue - R1 001 million
Vehicle Retail, Motor-related Head-Office
Logistics Logistics Vehicle Import, Rental and Financial Services and
Group Africa International Distribution and Dealerships After Market Parts and Products Eliminations Insurance
31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December 30 June
2015 2014^ 2015^ 2015 2014 2015 2015 2014 2015 2015 2014^ 2015 2015 2014^ 2015^ 2015 2014 2015 2015 2014^ 2015 2015~ 2014 2015~
Segment financial position Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Operating assets* 63 437 60 596 56 944 17 281 15 550 15 310 12 996 11 300 11 250 15 861 14 338 15 350 15 425 13 701 13 702 3 435 2 414 2 647 (1 561) (1 183) (1 315) 4 476
- South Africa 35 682 37 555 34 312 9 474 9 441 9 034 13 562 12 839 13 885 10 916 10 943 10 113 3 435 2 414 2 647 (1 705) (1 345) (1 367) 3 263
- Rest of Africa 8 673 7 578 6 557 7 807 6 108 6 275 741 169 201 125 88 81 1 213
- International 19 082 15 463 16 075 1 1 12 996 11 300 11 250 1 558 1 330 1 264 4 384 2 670 3 508 144 162 52
Fixed assets included in
operating assets 21 949 20 134 20 180 5 589 5 178 5 308 5 634 4 543 4 682 5 141 5 013 5 103 5 325 5 220 4 982 1 372 1 044 997 (1 112) (1 014) (892) 150
- Property, plant and equipment 11 736 10 746 10 967 2 466 1 876 2 096 2 344 2 291 2 244 3 553 3 229 3 346 3 387 3 203 3 313 8 25 9 (22) (28) (41) 150
- Transport fleet 6 372 5 513 5 610 3 123 3 302 3 212 3 290 2 252 2 438 (41) (41) (40)
- Vehicles for hire 3 841 3 875 3 603 1 588 1 784 1 757 1 938 2 017 1 669 1 364 1 019 988 (1 049) (945) (811)
Operating liabilities* 25 951 24 271 23 774 6 360 5 678 5 512 4 952 4 216 4 304 5 581 4 130 5 594 6 489 5 326 5 870 3 902 3 442 3 468 (1 333) (1 124) (974) 2 603
- South Africa 14 255 15 270 14 794 3 503 3 970 3 682 4 907 3 918 5 358 3 422 3 496 3 338 3 902 3 442 3 468 (1 479) (1 325) (1 052) 1 769
- Rest of Africa 3 348 2 600 1 896 2 857 1 705 1 824 473 45 62 18 16 10 834
- International 8 348 6 401 7 084 3 6 4 952 4 216 4 304 201 167 174 3 049 1 814 2 522 146 201 78
Net working capital* 11 475 9 495 9 267 1 729 1 460 1 183 358 539 416 5 130 4 846 4 294 2 742 2 453 2 100 526 287 565 990 855 709 (945)
- South Africa 9 056 7 387 7 253 764 563 336 4 415 4 328 3 834 2 371 2 187 1 924 526 287 565 980 757 594 (735)
- Rest of Africa 1 169 750 924 965 899 852 195 53 62 10 7 11 (1) 1 (1) (210)
- International 1 250 1 358 1 090 (2) (5) 358 539 416 520 465 398 361 259 165 11 97 116
Net debt*# 18 150 15 143 14 327 6 064 5 340 4 872 3 362 4 383 4 150 5 967 5 484 4 661 3 223 3 290 2 482 (1 529) (1 839) (1 738) 1 063 (416) (100) (1 099)
- South Africa 11 248 8 688 8 204 3 172 2 752 2 669 5 329 4 930 4 185 2 772 2 899 2 199 (1 529) (1 839) (1 738) 1 504 525 889 (579)
- Rest of Africa 3 246 2 287 2 454 2 892 2 585 2 209 278 181 194 76 41 51 (520)
- International 3 656 4 168 3 669 3 (6) 3 362 4 383 4 150 360 373 282 375 350 232 (441) (941) (989)
Net capital expenditure 3 062 2 765 4 519 597 441 1 046 513 614 1 173 1 141 813 1 199 573 792 844 453 636 649 (273) (587) (500) 58 56 108
- South Africa 2 226 1 897 2 856 369 277 711 1 111 810 1 182 510 707 710 453 636 649 (273) (588) (501) 56 55 105
- Rest of Africa 293 189 369 228 164 335 17 1 8 46 22 23 1 2 1 3
- International 543 679 1 294 513 614 1 173 13 2 9 17 63 111 1
^ Restated as described in note 2.1 and 2.2
* Defined in the glossary of terms
~ The assets and liabilities of the Insurance business are shown as discontinued operations at 30 June and 31 December 2015
# The 30 June 2015 net debt restated to include the non-redeemable, non participating preference shares
Glossary of terms
Net asset value per share equity attributable to owners of Imperial divided by total ordinary shares in issue net of
share repurchased (the deferred ordinary shares only participate to the extent of their par
value of 0,04 cents).
Net debt is the aggregate of interest-bearing borrowings, non-redeemable, non-participating
preference shares less cash resources.
Net working capital consists of inventories, trade and other receivables, trade and other payables and
provisions.
Operating assets total assets less loans receivable, tax assets, assets classified as held for sale and cash
resources in respect of non-financial services segments.
Operating liabilities total liabilities less non-redeemable, non participating preference shares, interest-bearing
borrowings, tax liabilities, put option liabilities and liabilities directly associated with
assets classified as held for sale.
Operating margin (%) operating profit divided by revenue.
Pre-tax profits calculated as profit before tax, impairment of goodwill and profit or loss on sale of
investment in subsidiaries, associates and joint ventures and other businesses.
Return on invested capital (%) return divided by invested capital. Return is calculated using profit after tax and share of
non-controlling interests, increased by the after-tax effects of net finance costs and
exceptional items. Invested capital is a 12-month average of shareholders equity plus
preference shares plus debt (long term and short term interest-bearing borrowings less
long term loans receivable) less non-financial services cash resources.
Weighted average cost of capital (WACC) (%) calculated by multiplying the cost of each capital component by its proportional weight,
therefore: WACC = (after tax cost of debt % multiplied by average debt weighting) +
(cost of equity multiplied by average equity weighting).
Corporate information
Directors
SP Kana# (Chairman), A Tugendhaft##, (Deputy Chairman), MJ Lamberti (Chief Executive), OS Arbee, MP de Canha, P Cooper#, GW Dempster#,
T Dingaan#, RM Kgosana#, P Langeni#, PB Michaux, MV Moosa##, RJA Sparks#, M Swanepoel, Y Waja#
# Independent non-executive ## Non-executive
Company Secretary
RA Venter
Investor Relations Manager
E Mansingh
Business address and registered office
Imperial Place, Jeppe Quondam, 79 Boeing Road East, Bedfordview, 2007
Share transfer secretaries
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001
Sponsor
Merrill Lynch SA (Pty) Limited, 138 West Street, Sandown Sandton, 2196
The results announcement is available on the Imperial website: www.imperial.co.za
Date: 23/02/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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