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Trading Update and Pre Closed Period Brief
Imperial Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1946/021048/06
Share code: IPL
ISIN: ZAE000067211
("Imperial")
Pre Closed Period Briefing to Annual Investor Day meeting and
Trading Update
Introduction
As publicised on the 22nd February 2016, Imperial’s half year revenue
for continuing operations grew 6% to R58.2 billion and half year
operating profit grew 4% to R2.8 billion, in the 6 months to
December 2015.
Imperial’s management team will today host members of the investment
community at its Annual Investor Day in Johannesburg. The following
update will be provided during the event and the presentation in
support of the event will be available on the company’s website
(www.imperial.co.za) from 13h00 CAT today.
Environment / operating context
South Africa
The economy tightened and the trading environment remains
challenging in South Africa, where R33.7 billion or 58% of Group
revenue and R1.8 billion or 65% of Group operating profit was
generated in the 6 months to December 2015.
Specific factors affecting Imperial in South Africa are: a 29%
decline of the average R/$ exchange rate over the past year; a 9.8%
decline in YTD national new vehicle sales; a sharp decline in
commodity volumes and generally subdued consumer goods volumes.
Eurozone
A slow economic recovery continued and trading conditions were
satisfactory in the Eurozone, where R17.6 billion or 30% of Group
revenue and R0.5 billion or 19% of Group operating profit was
generated in the 6 months to December 2015.
Specific factors affecting Imperial in the Eurozone are: solid UK
growth supported our business and the weakening of the Rand against
the £ & € assisted ZAR denominated results.
Rest of Africa
Falling commodity demand and the consequent impact on currencies and
private consumption has reduced the growth rate in the Rest of
Africa, where R6.9 billion or 12% of Group revenue and R0.45 billion
or 16% of Group operating profit was generated in the 6 months to
December 2015.
Specific factors affecting Imperial in certain African countries
are: slowing growth rates, and currency volatility and devaluation.
Group strategy / Investment thesis
Imperial strives to create long term value for stakeholders through
strategic clarity, financial discipline, operational excellence and
strictly defined capital allocation principles.
Notwithstanding current environmental challenges, Imperial’s
investment thesis is unchanged and steady progress as detailed is
being registered with each of the following five capital allocation
objectives:
1. To release capital and sharpen executive focus, by disposing of
non-core, strategically misaligned, underperforming or low return on
effort assets.
- To date, although certain transactions are still subject to
regulatory approval, businesses and assets to the value of R5.3
billion have been disposed of.
- Over the next eighteen months it is anticipated that disposals
(mainly non-strategic properties) amounting to a further R2.6
billion will occur.
2. We will invest capital in South Africa to maintain the quality of
our assets and our market leadership in our logistics and motor
vehicle businesses.
- During the current financial year, various acquisitions have been
made, the most notable being the acquisition of the 10% minority
in AMH for R750 million, and the acquisition of 14% of the
minority in Midas.
- In addition R3.2 billion of capital was invested in South Africa.
3. 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.
- During the current financial year two small companies were
acquired.
- Capital of R47 million was invested to sustain the exceptionally
high organic growth rate in the Rest of Africa.
4. We will invest cash generated from operations and from
divestments to grow our businesses beyond the continent, but with an
emphasis on logistics.
- During the current financial year we acquired: Humberside Tail
Lifts in the UK; Van den Anker in Germany; a further 10% of
Netherlands based Imres of which we now own 80%; and, as
announced on 1st June 2016 and still subject to regulatory
approval, Palletways for £163 million (R3.8 billion).
- Capital of R1.1 billion was invested beyond Africa.
5. The development and sustainability of Imperial will be
underpinned by investment in human capital and information systems.
- In the current financial year, Group wide investments in human
capital development and information systems exceeded R0.5
billion.
Updated guidance by reporting division for the year to 30th June 2016
The executive management of Imperial will provide qualitative detail
on the operations of each division in response to questions from
members of the investment community and in support of the following
guidance, some of which has changed since the release of the H1
F2016 results on the 22nd February 2016.
– Logistics Africa: we expect to grow revenue, with a marginal
decline in operating profit.
– Logistics International: we expect revenue and operating profit
to decline in Euro’s due to strategic disposals (mainly Neska)
and increased labour costs in certain automotive sites we serve.
– Vehicle Import, Distribution and Dealerships: we expect single
digit revenue and operating profit growth despite the sale of the
Goscor business.
NOTE: Vehicle imports are currently covered forward to December
2016 at the weighted average rates of USD 15.25 and EUR 17.22 to
the ZAR.
– Vehicle Retail, Rental and Aftermarket Parts: we expect single
digit growth of revenue and single digit decline in operating
profit.
– Financial Services: we expect single digit growth of revenue and
operating profit from Motor Related Financial Services and
Products.
Unchanged guidance for Imperial Group for the year to 30th June 2016
We expect single digit revenue growth and unchanged operating profit
in continuing operations, and will continue to execute on our
espoused strategies.
The forecast financial information herein has not been reviewed or
reported on by Imperial’s auditors.
Sponsor:
Merrill Lynch SA (Pty) Limited
Date: 15 June 2016
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