Wrap Text
Unaudited interim results for the six months ended 31 December 2017
IMPERIAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(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 2017
ABOUT IMPERIAL
Imperial Holdings is a JSE listed South African-based holding company, employing over 49 000 people in 33 mainly
African and Eurozone countries, operating exclusively in the logistics and vehicle sectors, as:
- Imperial Logistics: a mainly African and European provider of integrated outsourced value-adding logistics,
supply chain and route-to-market solutions, customised to ensure the relevance and competitiveness of its
clients, generating 41% and 45% of group* revenue and operating profit respectively, with 62% of foreign
operating profit; and
- Motus: an integrated motor vehicle group, operating across the value chain (import, distribution, retail, rental,
aftermarket parts, and vehicle-related financial services) generating 59% and 55% of group* revenue and operating
profit respectively, with 13% of foreign operating profit.
* Excludes head office and eliminations.
PERFORMANCE AND OVERVIEW OF RESULTS
Our performance
Group financial highlights
- Record half year revenue up 11% to R66,5 billion
- HEPS up 16% to 717 cents per share
- Operating profit up 5% to R3,1 billion (35% foreign)
- Free cash flow (post maintenance capital expenditure) of R1,3 billion (2017: outflow of R451 million)
- EPS up 9% to 671 cents per share
- Free cash conversion ratio to up 0,9 times (-0.3 times in 2017)
- Net debt to equity ratio improved from 98% in December 2016 to 80% (71% including Schirm proceeds received in
January 2018)
- Weighted average cost of capital 9,2% (2017: 9,3%)
- Return on equity 12,5% (2017: 12,1%)
- Return on invested capital 12,2% (2017: 12,0%)
- Interim cash dividend of 323 cents per share, 45% of HEPS (2017: 320 cents per share)
* Excludes discontinued operations, businesses held for sale and head office and eliminations.
Note: Prior year restated for VAPS reallocated from discontinued to continuing operations (R36 million increase in
operating profit) and prior year restatement (R40 million increase in operating profit). ROE, ROIC and WACC are
calculated on a 12 month basis based on continuing operations.
CONTINUED PROGRESS
Results overview
The transformation and development of Imperial in recent years has been directed at value creation through strategic
clarity, managerial focus and shareholder insight. The first is being achieved through portfolio rationalisation, the
second through organisation structure and the third through disclosure.
- Imperial produced solid results and an improvement in all key financial metrics in the six months to 31 December 2017,
supported by acquisitions, increased vehicle sales in Motus and a good performance from Imperial Logistics,
particularly in South Africa.
- Excluding current and prior period acquisitions and disposals, total revenue for the group increased by 5% and
operating profit remained stable.
- Operating margin declined from 4,9% to 4,6%, resulting from a reduction in luxury vehicle brands in favour of smaller
lower margin entry level vehicles and the acquisition by Motus of the lower margin Pentagon (UK) and SWT (Australia)
businesses.
- Foreign revenue increased 20% to R30,7 billion (46% of group revenue) and foreign operating profit increased 4% to
R1,1 billion (35% of group operating profit).
- Non-vehicle revenue increased 5% to R27,0 billion (41% of group revenue) and operating profit increased 7% to
R1,4 billion (45% of group operating profit).
- A full reconciliation from earnings to headline earnings is provided in the group financial performance section.
Core earnings is no longer a relevant financial measure and has been discontinued.
- Net working capital of R8,9 billion was in line with June 2017 (R11,1 billion at December 2016).
- Disposals of non-strategic businesses and properties during the six-month period generated proceeds of R693 million
(excluding Schirm). Net assets held for sale amounted to approximately R2,5 billion, comprising non-strategic
properties, Schirm and Transport Holdings.
- An interim cash dividend of 323 cents per ordinary share has been declared.
Environment
Imperial's activities on the African continent produced 63% and 80% respectively of group revenues and operating
profits during the six months to 31 December 2017, with the remainder generated mainly in Europe and the United Kingdom.
South Africa
Structural challenges, including high unemployment, struggling State Owned Enterprises (SOEs) and pressure on
government finances continue to erode consumer and business confidence. There are however early indications that
new political leadership will give rise to less corrupt, more accountable government and a general improvement in
confidence and growth in South Africa, where R35,8 billion or 54% of group revenue and R2,0 billion or 65% of group
operating profit was generated in the six months to 31 December 2017.
Positive emerging market sentiment and the weakening of the USD resulted in the R/USD exchange rate strengthening
by 10% during the period, with short-term volatility exacerbated by local factors.
The impact of this environment on Imperial Logistics' operating profit, 38% of which is generated in South Africa,
has been depressed volumes and competitive pressures. The impact on the operating profit of Motus, approximately
87% of which is generated in South Africa, is a highly competitive vehicle market where national vehicle unit sales
as reported by NAAMSA increased 5%.
Rest of Africa
Firming commodity prices and gradually strengthening domestic demand improved economic prospects in sub-Saharan
Africa, where R6,2 billion or 9% of group revenue and R466 million or 15% of group operating profit was generated
in the six months to 31 December 2017.
Notable developments affecting Imperial Logistics were: an improvement in the cost of and access to currency in
Nigeria; hesitant investment and consumer purchasing in Kenya resulting from political uncertainty and disruptive
elections; Namibia's 5th successive quarter of recession, and increased competition and subdued demand from key aid
and relief markets. Motus has limited activity in the region.
Eurozone, United Kingdom (UK) and Australia
Our operations in the Eurozone generated R24,5 billion or 37% of group revenue and R618 million or 20% of group
operating profit in the six months to 31 December 2017.
Economic conditions in Europe are buoyant but economic growth and the vehicle market in the United Kingdom is being
depressed by the uncertainties of Brexit. The Australian vehicle market is showing steady growth. Conditions in
Imperial's remaining operating jurisdictions are stable.
Against this background, we provide shareholders with current information on the group's strategy and performance.
Strategy
The transformation and development of Imperial in recent years has been directed at value creation through strategic
clarity, managerial focus and shareholder insight. The first is being achieved through portfolio rationalisation, the
second through organisation structure and the third through disclosure. This approach has exposed the absence of
operational or financial synergies and resulted in the rapid establishment of Imperial Logistics and Motus as two
large independent divisions. Both are now managed and reported on separately, with decreasing functional support and
associated costs emanating from the holding company. To date our progress has exceeded expectations.
At this stage, the key strategic question facing Imperial Holdings is whether the long term fortunes of Imperial Logistics
and Motus will be enhanced by them being separately listed. To answer this we are currently assessing whether value will
accrue from the management of each division having direct access and accountability to debt and equity markets. We are
also determining whether investors will attribute additional value to direct investment in either division. The
self-sufficiency, independence and balance sheet capacity necessary for both division’s growth strategies is a key priority
and Imperial continues to assess all options available to achieve further flexibility in this regard. Progress to date has
been good and we expect this to be in place by June 2018.
The board expects to take the decision as to whether to pursue separate listings in late June or early July 2018.
As announced previously, the board believes that the unbundling of Motus would be the most effective path to achieving
that result.
Capital allocation
Despite external challenges and an ambitious restructuring process, Imperial's investment thesis is unchanged.
The following provides detail on progress during the reporting period with each of our 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.
In HY1 2018, we disposed of:
- Non-strategic properties for proceeds of R606 million. A further 27 properties with a carrying value of R543 million
are held for sale;
- Laabs GmbH, a €16 million revenue liquid food transporter specialising in liquid chocolate products and raw materials
in Europe, for €2 million (R32 million) in October 2017; and
- Interests in smaller entities in Imperial Logistics amounting to approximately R55 million.
Disposals post HY1 2018 include:
- The group's interest in and claims against Schirm GmbH, the contract manufacturing service business of Imperial
Chemical Logistics GmbH, and related property transactions for a total cash price of €134 million (R2 billion).
The transaction was concluded on 17 January 2018 and payment was received on 30 January 2018;
- Transport Holdings in Botswana for R200 million, subject to funding approval.
- Although the bulk of identified disposals have been concluded, continual analysis of the strategic and financial
performance of businesses will result in refinements to the portfolio of Imperial Logistics and Motus over the
medium term.
2 We will invest capital in South Africa to maintain the quality of assets and market leadership in our logistics and motor
vehicle businesses.
- Net capital expenditure of R1,3 billion was invested in operations during the period, mainly in vehicles for hire.
3 We will invest capital in the African Regions primarily to achieve our 2020 objective for the revenue and profits generated
in that region to equal that of our South African logistics business, and secondarily to expand our vehicle-related
businesses in the region.
- Imperial Logistics acquired 70% of Surgipharm Limited in Kenya for USD35 million (R490 million), effective 1 July 2017.
Surgipharm is strategically aligned to accelerate our industry presence and relationships with pharmaceutical principals
on the African continent and provides an excellent platform for further growth in other East African markets. This
acquisition performed below expectation during the period, due to political uncertainty and disruptive elections in Kenya.
4 We will invest the cash generated from operations and divestments to grow our businesses beyond the continent, but with an
emphasis on logistics.
- We acquired Pentagon Motor Holdings, which operates 21 prime retail dealerships in the UK, for £28 million (R479 million),
effective 1 September 2017. Pentagon supports Motus' strategy to deploy capital and its vehicle retail expertise in
pursuit of growth beyond South Africa, and it complements our existing commercial vehicle business in the UK.
Performance in our first four months of ownership was depressed by the convergence of declining UK passenger vehicle
sales, market realignment from diesel vehicles and Vauxhall changing ownership from General Motors to the French
PSA group. Forecasts for the current six months are promising.
- We acquired 75% of Australian based SWT Group Proprietary Limited, which operates 16 dealerships, for AUD24,2 million
(R261 million), effective 1 October 2017. This acquisition performed in line with expectations during the period and
complements our existing dealership footprint in Australia.
- Net capital expenditure of R312 million was invested in operations mainly in Europe and the United Kingdom.
5 The development and sustainability of Imperial will be underpinned by investment in human capital and information systems.
- Group-wide investments in human capital development and information systems amounted to R235 million*.
* Only includes capital expenditure on human capital development and IT systems
DIVISIONAL PERFORMANCE
Results overview
Imperial Logistics
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Rm) 27 033 25 862 5 24 803 9
Operating profit (Rm) 1 391 1 300 7 1 464 (5)
Operating margin (%) 5,1 5,0 5,9
Return on invested capital (%) 11,7 11,4
Weighted average cost of capital (%) 8,2 8,4
Targeted ROIC (WACC+3%) 11,2 11,4
Debt:equity ratio (%) 114 167
Debt:equity ratio (%) post Schirm proceeds 91
Note: ROIC and WACC are calculated on a rolling 12 month basis.
Revenue R27 033 million 5%
Operating profit R1 391 million 7%
Operating margin 5,1%
Imperial Logistics is a mainly African and European provider of integrated outsourced value-add logistics, supply
chain and route-to-market solutions, customised to ensure the relevance and competitiveness of its clients. With
established capabilities in transportation, warehousing, distribution and synchronisation management, and expanding
capabilities in international freight management, the division operates in specific industry verticals: healthcare,
consumer packaged goods, manufacturing and mining, chemicals and energy, automotive, machinery and equipment,
and agriculture.
Imperial Logistics recorded growth in revenue and operating profit of 5% and 7% respectively. Excluding businesses
held for sale, revenue and operating profit increased by 7% and 5% respectively. These results comprised a good
performance from Logistics South Africa in challenging trading conditions, a solid performance from Ecohealth in Nigeria
and CIC in Namibia, the disposal and closures of some smaller, underperforming businesses in South Africa and African
Regions and solid results from the international shipping and automotive segments in Logistics International. The disposal
of the Schirm business was only concluded in January 2018 and is therefore included in businesses held for sale during this
reporting period. The net debt to equity ratio (91% including the proceeds from Schirm) has improved significantly following
the sale of non-core or underperforming businesses and non-strategic properties, disciplined working capital management
and capital expenditure and recapitalisation of African Regions. Despite the improvement in gearing during the last 12 months,
the current level is not optimal and further improvement of the balance sheet capacity is necessary for the pursuit of its
strategy. The ROIC of 11,7% compares to 11,4% in the prior period and is above the target hurdle rate of WACC+3%.
Net capital expenditure reduced significantly to R324 million from R611 million in the prior period when investment
was incurred on additional chemical manufacturing capacity in Europe and two additional convoys in South America. Capital
expenditure in the current period comprised mainly replacement of transport fleet in South Africa, reduced by the
proceeds from asset disposals of R451 million, including property disposals of R287 million.
Logistics South Africa
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Rm) 8 510 8 335 2 8 163 4
Operating profit (Rm) 522 461 13 458 14
Operating margin (%) 6,1 5,5 5,6
Return on invested capital (%) 13,8 10,4
Weighted average cost of capital (%) 10,4 10,4
Targeted ROIC (WACC+3%) 13,4 13,4
Debt:equity ratio (%) 83 91
Note: ROIC and WACC are calculated on a rolling 12 month basis. The above table includes businesses held for sale
and eliminations.
Revenue R8 510 million 2%
Operating profit R522 million 13%
Operating margin 6,1%
Logistics South Africa performed well in difficult trading conditions, increasing revenue and operating profit by
2% and 13% respectively, and 4% and 3% respectively excluding businesses held for sale.
Performance was enhanced by increased volumes in the commodities operations, a six month contribution from the Itumele
Bus Lines acquisition, solid results from fuel and gas, managed solutions and some of the transport and distribution
operations, significantly reduced losses from Imperial Cold Logistics and the disposal and closures of some smaller,
underperforming businesses in the current and prior periods. The consumer logistics business did not perform to
expectation due to lower sales volumes in the healthcare and retail logistics businesses.
ROIC improved significantly to 13,8% from 10,4% mainly due to increased profitability, and the sale of non-strategic
properties and underperforming businesses.
The disposal of 30% of Imperial Logistics South Africa to a BBBEE partner is progressing steadily. The application
and screening process was completed in October 2017, and negotiations are proceeding with a party who has satisfied
the major transaction criteria, namely pricing, proof of funding, long-term commitment and the capabilities to add
value. We expect to finalise this transaction by June 2018.
Logistics African Regions
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Rm) 5 551 5 359 4 4 588 21
Operating profit (Rm) 408 392 4 348 17
Operating margin (%) 7,4 7,3 7,6
Return on invested capital (%) 20,6 22,6
Weighted average cost of capital (%) 11,5 10,7
Targeted ROIC (WACC+4%) 15,5 14,7
Debt:equity ratio (%) 130 >150
Note: ROIC and WACC are calculated on a rolling 12 month basis. The above table includes businesses held for sale
and eliminations.
Revenue R5 551 million 4%
Operating profit R408 million 4%
Operating margin 7,4%
Imperial Logistics African Regions increased revenue and operating profit by 4% with a mixed performance across
the portfolio. Revenue and operating profit, excluding businesses held for sale (Transport Holdings), increased by
12% and 3% respectively.
Results were supported by a solid performance from Ecohealth, Nigeria's leading distributor of pharmaceuticals,
the acquisition of Surgipharm where a positive contribution was depressed by political uncertainty and disruptive
elections in Kenya, a good result from the FMCG route-to-market business enhanced by the disposal of the loss-making
Global Holdings and the disposal of certain unprofitable transport entities in the prior financial year.
The FMCG route-to-market Namibian operations performed satisfactorily despite the effects of Namibia's 5th successive
quarter of recession. Transport operations in Namibia are experiencing reduced volumes, vindicating our strategy to
reduce asset intensity. Imres underperformed due to increased competition, subdued demand from its key aid and relief
markets and longer lead times experienced in converting orders to sales in its key markets. Managed Solutions businesses
in SADC performed well. Loss of the USAID contract depressed the sub-Saharan Healthcare logistics business.
ROIC at 20,6% declined from 22,6% mainly due to an increase in our investment in Ecohealth, from 68% to 87% and
higher working capital.
Logistics International
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Euro million) 821 795 3 843 3
Operating profit (Euro million) 28,8 29,3 (2) 46 (37)
Operating margin (%) 3,5 3,7 5,5
Revenue (Rm) 12 972 12 168 7 12 052 8
Operating profit (Rm) 461 447 3 658 (30)
Operating margin (%) 3,6 3,7 5,5
Return on invested capital (%) 8,3 8,6
Weighted average cost of capital (%) 6,2 6,5
Targeted ROIC (WACC+3%) 8,2 8,5
Debt:equity ratio (%) 133 161
Debt:equity ratio (%) post Schirm proceeds 86
Note: ROIC and WACC are calculated on a rolling 12 month basis. The above table includes businesses held for sale
and eliminations.
Revenue €821 million 3%
Operating profit €28,8 million (2%)
Operating margin 3,5%
Logistics International's revenue and operating profit increased by 3% and decreased by 2% respectively in
Euro, and increased by 7% and 3% respectively in Rand, which weakened 3% on average against the Euro during
the period. Revenue and operating profit in Euro terms, excluding businesses held for sale (Schirm), increased
by 3% and 4% respectively.
The performance of the Transport Solutions business was supported by solid results from international and liquid bulk
shipping, road transport and automotive contract logistics. Following the commissioning of two additional convoys in
March 2017, the South American operation is operating at full capacity in a strong market with optimal water levels,
utilising seven push boats with 84 barges. Dry bulk shipping in Germany underperformed due to prolonged low water
levels on the River Rhine during the period.
Profitability of the Supply Chain Solutions business was depressed by reduced profitability from chemical
manufacturing and lower volumes from key customers in the retail and industrial operations; partially offset
by strong performances from the automotive contract logistics businesses. Palletways experienced good volume
and revenue growth but its profitability was depressed by increased costs in the UK and Italy.
ROIC declined marginally to 8,3% from 8,6%.
Motus
Motus
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Rm) 39 678 34 095 16 32 455 22
Operating profit (Rm) 1 716 1 642 5 1 668 3
Operating margin (%) 4,3 4,8 5,1
Return on invested capital (%) 12,0 12,5
Weighted average cost of capital (%) 10,4 10,4
Targeted ROIC (WACC+3%) 13,4 13,4
Debt:equity ratio (%) 62 78
Note: ROIC and WACC are calculated on a rolling 12 month basis.
Since the publication of the HY1 2017 results there have been adjustments to the sub-divisions of Motus, requiring
the segmental report to be amended and the reported HY1 2017 numbers to be restated in the FY 2017 results. These
changes comprised reallocations of: appropriate eliminations to Motus out of group head office and eliminations;
the transfer of the African distributorship operations from the Vehicle Retail and Rental sub-division to the
Vehicle Import and Distribution sub-division; and the transfer of Beekmans from the Vehicle Import and Distribution
sub-division to the After Market Parts sub-division. The numbers were also adjusted to include the VAPs business
in Financial Services.
Revenue R39 678 million 16%
Operating profit R1 716 million 5%
Operating margin 4,3%
Motus is Southern Africa's largest vehicle group, operating across the motor value chain, importing, distributing,
retailing and renting vehicles and aftermarket parts, supported and augmented by Motor Related Financial Services.
Revenue and operating profit for Motus increased by 16% and 5% respectively, with all four sub-divisions recording
revenue and profit growth. This was mainly due to competitive vehicle pricing and a strong improvement in entry level
and pre-owned vehicle sales in South Africa, where stable interest rates improved affordability. The acquisitions of
Pentagon in the UK and SWT in Australia contributed positively to revenue, but at lower margins. Excluding businesses
held for sale, revenue and operating profit increased by 18% and 4% respectively.
During the period Motus grew unit vehicle sales by 7% compared to national unit vehicle sales growth of 5% as
reported by NAAMSA. The Motus passenger and commercial vehicle businesses, including the UK and Australia, retailed
73 353 (2017: 59 696) new and 40 067 (2017: 36 580) pre-owned vehicles during the six months.
Property disposals and reduced investment in property and vehicles for hire resulted in net capital expenditure
declining from R1,8 billion in the prior period to R1,1 billion.
While we have provided separate ROIC, WACC and net debt to equity ratios for each sub-division, these ratios should
not be analysed in isolation as the sub-divisions of Motus operate in a uniquely integrated manner, to optimise client
offerings and market penetration with numerous cross-selling initiatives across the vehicle value chain.
Despite acquisitions, Motus' debt to equity ratio at 62% is below the prior period, mainly as a result of disciplined
working capital management, proceeds received from the disposal of non-strategic properties and reduced capital
expenditure in vehicles for hire.
Vehicle Import and Distribution
Exclusive South African importer of Hyundai, Kia, Renault and Mitsubishi automotive brands, with Nissan
distributorships in six African countries.
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Rm) 10 043 9 117 10 9 040 11
Operating profit (Rm) 303 286 6 442 (31)
Operating margin (%) 3,0 3,1 4,9
Return on invested capital (%) 9,4 6,2
Weighted average cost of capital (%) 10,8 10,0
Debt:equity ratio (%) 47 >100
Note: ROIC and WACC are calculated on a rolling 12 month basis.
Retail dealerships that were previously part of Vehicle Import, Distribution and Dealerships are now included in the
Vehicle Retail and Rental sub-division.
Revenue R10 043 million 10%
Operating profit R303 million 6%
Operating margin 3,0%
Revenue and operating profit from this sub-division increased by 10% and 6% respectively, as sales volumes increased
by 10% (Hyundai up 5%, Kia up 27% and Renault up 38%) with our vehicle mix aligned to market demand. The Motus importer
segment market share increased from 14,6% in the prior period to 15,3%.
At the end of January 2018, Hyundai and Kia forward cover on the US Dollar and Euro imports extends to August 2018 at
average rates of R13,50 to the US Dollar and R15,76 to the Euro. New trading arrangements with Renault have rendered
forward cover redundant. With the exception of Renault, Imperial's current guideline is to cover a minimum of seven
months forward and up to 75% of annual forecast orders, as stipulated by the South African Reserve Bank.
The African distributorships performed below expectations due to weak consumer demand in most of the markets in which
we operate. The capital deployed in these operations has been reduced and the viability of these operations are under
review.
During the period ROIC increased to 9,4% from 6,2%, resulting from a significant reduction in working capital, lower
investment in vehicles for hire and the sale of non-strategic properties.
Vehicle Retail and Rental
Representative in South Africa of 22 OEMs through 343 vehicle dealerships (including 94 pre-owned), 245 franchised
dealerships and 20 commercial vehicle dealerships, with 113 car rental outlets (Europcar and Tempest).
Manages and operates 58 commercial and 32 passenger vehicle dealerships in the UK, 33 passenger vehicle dealerships
in Australia and 16 car rental outlets (Europcar and Tempest) in Southern Africa.
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Rm) 32 359 28 175 15 27 458 18
Operating profit (Rm) 814 784 4 694 17
Operating margin (%) 2,5 2,8 2,5
Return on invested capital (%) 8,6 13,0
Weighted average cost of capital (%) 9,8 10,1
Debt:equity ratio (%) 85 38
Note: ROIC and WACC are calculated on a rolling 12 month basis.
All retail dealerships that were previously part of Vehicle Import, Distribution and Dealerships are now included in this sub-division.
Revenue R32 359 million 15%
Operating profit R814 million 4%
Operating margin 2,5%
The Vehicle Retail and Rental operations recorded an increase in revenue and operating profit of 15% and
4% respectively, assisted by the inclusion of the UK (Pentagon) and Australian (SWT) acquisitions which enhanced
revenue but reduced margins.
The Motus passenger and light commercial vehicle (LCV) businesses in South Africa experienced a 6% increase in new
vehicle sales units from 27 008 to 28 645. Dealerships of the importer brands performed particularly well mainly due
to an increase in sales volumes in Hyundai, Kia and Renault. Higher sales of entry level hatch vehicles and small SUVs
were recorded compared to lower sales volumes in the luxury brands segment. Nine underperforming dealerships were
closed during the period. The commercial vehicle business in South Africa performed well in challenging trading
conditions and increased operating profit off a low base. The parts and aftersales segments continue to perform well.
Revenue and operating profit in the UK business increased by 84% and 23% respectively due to strong performance from
the UK Commercials operations and the acquisition of Pentagon. The passenger segment performed below expectations and
remains under pressure due to Brexit-related consumer concerns, a reduction in sales of diesel vehicles and Vauxhall
changing ownership from General Motors to the French PSA group. The latter resulted in substantially reduced OEM
assistance, which is expected to improve in the second half of the financial year as PSA implements its new trading
policies.
Car rental increased its revenue and operating profit by 16% and 9% respectively due to increased vehicle rental
volumes from the inbound and leisure segments, and higher post rental vehicle sales. The vehicle rental utilisation
was maintained at 70%, while accident costs remain high but lower than the prior period.
The Australian vehicle market recorded marginal growth in the reporting period but margins on new vehicles remain
under pressure. The Australian operations increased revenue by 12% but operating profit decreased by 8% compared to
the prior period in which two new model launches in the Ford franchise were exceptionally successful. This was
partially offset by the acquisition of SWT, concluded in October 2017, which is performing in line with expectations.
ROIC reduced to 8,6% from 13,0% due to increased working capital and the acquisition of the lower margin Pentagon
and SWT auto dealer groups.
Aftermarket Parts
Distributor, wholesaler and retailer of accessories and parts for older vehicles, through 35 owned branches,
43 retailed owned stores and network of 720 Midas (AAAS), Alert Engine Parts and Turbo Exchange franchised outlets.
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Rm) 3 354 3 125 7 3 028 11
Operating profit (Rm) 205 190 8 216 (5)
Operating margin (%) 6,1 6,1 7,1
Return on invested capital (%) 19,4 23,2
Weighted average cost of capital (%) 11,0 11,2
Debt:equity ratio (%) 58 79
Note: ROIC and WACC are calculated on a rolling 12 month basis.
Revenue R3 354 million 7%
Operating profit R205 million 8%
Operating margin 6,1%
Revenue and operating profit grew by 7% and 8% respectively, supported by tighter cost control and strong performances
from Alert Engine Parts and Beekmans. Midas' (AAAS) performance was flat, depressed by market contraction, increased
pricing pressure and consumers trading down.
ROIC decreased to 19,4% from 23,2% due to increased working capital and an investment in a warehouse facility which
was included in invested capital.
Motor Related Financial Services
Markets and administers service, maintenance and warranty plans, and other value-added products (~664 000 vehicles
under management). Develops and distributes innovative vehicle-related financial products and services through dealer
and vehicle finance channels, online and a national call centre. Provides fleet management services.
% change % change
HY1 2018 HY1 2017 on HY1 2017 HY2 2017 on HY2 2017
Revenue (Rm) 1 083 965 12 1 071 1
Operating profit (Rm) 465 458 2 375 24
Operating margin (%)* 42,9 47,5 35,0
Return on invested capital (%) 59,6 55,6
Weighted average cost of capital (%) 13,8 14,0
Debt:equity ratio (%) (78)** (92)
Note: ROIC and WACC are calculated on a rolling 12 month basis. Includes the VAPs business for all reporting periods.
* The operating margin reflects various business ventures that yield operating profits without any associated revenues.
** Includes net cash of R728 million.
Revenue R1 083 million 12%
Operating profit R465 million 2%
Operating margin 42,9%
Motor Related Financial Services grew revenue and operating profit by 12% and 2% respectively, supported by higher
profitability in demo vehicle sales and maintenance funds, with the loan book and returns from alliances with financial
institutions recording strong growth. Increased sales of monthly versus longer term service and maintenance plans
depressed margins. Arising from the Regent transaction, the prior period includes once-off income of R46 million
included in the VAPS business, which is not included in the current period.
We continue to focus on growing the fleet management business and building synergies within the retail motor
sub-divisions.
ROIC increased from 55,6% to 59,6% due to higher profitability during the rolling 12 month period.
Group financial performance
Results overview
Group profit and loss (extracts)
Total Continuing Continuing
R million HY1 2018 HY1 2017 % change
Revenue 66 520 59 727 11
Operating profit 3 093 2 955 5
Operating margin (%) 4,6% 4,9%
Net finance costs (753) (828) (9)
Income from associates 41 49 (16)
Forex losses (84) (121) (31)
Profit before tax 1 942 1 719 13
Tax (575) (498)
Net profit after tax 1 367 1 221 12
Attributable to non-controlling interests (61) (21)
Attributable to shareholders of Imperial 1 306 1 200 9
Effective tax rate (%) 30 29
Return on invested capital (%) 12,2 12,0
Weighted average cost of capital (%) 9,2 9,3
Note: WACC for each sub-division of the group is calculated by making appropriate country/regional risk adjustments
for the cost of equity and pricing for the cost of debt depending on jurisdiction. The group WACC calculation is a
weighted average of the respective sub-divisional WACCs. See glossary of terms. ROIC is calculated based on taxed
operating profit plus income from associates divided by the 12 month average invested capital (total equity and
net interest-bearing borrowings).
Group profit before tax increased 13%, attributable to:
- an increase in group operating profit of R138 million;
- a R75 million decrease in net finance costs due to lower average debt levels;
- foreign exchange losses decreased by R37 million to R84 million mainly due to:
- Forex losses in Imperial Logistics (due mainly to a strengthening Rand in African Regions) were contained to
R39 million against R153 million in the prior period; and
- Motus losses of R52 million compared to a gain of R12 million in the prior period due mainly to mark to market
losses on forward exchange options used as hedges against the strengthening of the Rand.
- acquisition costs were R24 million lower than the prior period which included transaction costs for Palletways; and
- amortisation of intangibles arising from business combinations decreased by R37 million due to certain intangible
assets being fully amortised in F2017.
The above was offset by impairment losses of R72 million relating to assets held for sale and income from associates
which declined due to Mix Telematics being sold in the prior period and the underperformance of MDS Logistics in Nigeria.
The effective tax rate for the group at 30% is in line with the prior year.
Profits to non-controlling interests increased compared to the prior period mainly due to improved results from
Renault and Ecohealth. The recent acquisitions of Surgipharm and Itumele Bus Lines also contributed to the increase.
Reconciliation from earnings to headline earnings
Continuing %
R million HY1 2018 HY1 2017 change
Net profit attributable to Imperial
shareholders (earnings) 1 306 1 200 9
Profit on disposal of assets/investments (64) (43)
Impairments of goodwill and other assets 58
Net loss on sale of businesses 18 46
Impairment losses on assets of disposal groups 72
Other (13)
Tax and non-controlling interests 7 11
Headline earnings 1 397 1 201 16
Earnings and headline earnings per share
Total Continuing Continuing
R million HY1 2018 HY1 2017 % change
Basic EPS (cents) 671 618 9
Basic HEPS (cents) 717 618 16
* Prior year restated for VAPS reallocated from discontinued to continuing operations (R36 million increase in
operating profit) and prior year restatement (R40 million increase in operating profit).
Financial position
December June %
R million 2017 2017 change
Goodwill and intangible assets 9 172 9 529 (4)
Property, plant and equipment 9 667 10 371 (7)
Investment in associates and joint venture 1 204 1 002 20
Transport fleet 5 345 5 560 (4)
Vehicles for hire 4 489 3 963 13
Investments and other financial assets 1 213 805 51
Net working capital 8 884 8 956 (1)
Other assets 2 145 1 839 17
Assets held for sale 3 097 979
Net debt (16 808) (14 647) 15
Non-redeemable, non-participating
preference shares (441) (441)
Other liabilities (6 887) (7 655) (10)
Liabilities directly associated with
assets held for sale (627)
Total shareholders' equity 20 453 20 261
Total assets 70 499 68 853 2
Total liabilities (50 046) (48 592) 3
The three most significant factors impacting the financial position at 31 December 2017 compared to
30 June 2017 were:
- since 30 June 2017, the Rand strengthened by 6% to the USD, 2% to the GBP and 1% to the Euro. This resulted
in the overall balance sheet decreasing with a net R312 million negative impact to the foreign currency
translation reserve;
- the disposals of Schirm and Transport Holdings Botswana resulted in assets to the value of R2,6 billion and
liabilities of R627 million being reclassified as held for sale on the balance sheet; and
- the acquisitions of Surgipharm (R490 million), Pentagon (R479 million) and SWT (R261 million), and a further
19% in Ecohealth (R627 million) during the period.
Goodwill and intangible assets decreased by 4% to R9,2 billion due to:
- the strengthening of the Rand;
- reclassification to assets of disposal groups; and
- amortisation of intangible assets arising from business combinations contributed R226 million to the decline.
The above was partly offset by the acquisitions of Surgipharm (R537 million), Pentagon (R185 million) and SWT
(R212 million).
Property, plant and equipment decreased by 7% to R9,7 billion due to:
- reclassification of PPE in Schirm and Transport Holdings Botswana as held for sale;
- currency adjustments; and
- disposals of PPE.
The above was partly offset by additions to PPE net of depreciation (mainly in Logistics) and the acquisitions of
Pentagon, SWT and Surgipharm.
Investment in associates and joint ventures increased by 20% resulting from the acquisitions of IC Arco Motor Industry
Limited, 58 Fleet Investment and Imperial Mobility Associates.
Vehicles for hire increased by 13% mainly due to re-fleeting ahead of the peak season.
Net working capital was in line with 30 June 2017 but improved significantly when compared to the prior period largely
due to disciplined working capital management, an increase in the FEC liability due to the strengthening Rand and
extended credit terms from suppliers in Motus.
Investment and other financial assets increased 51% due to the reclassification of dividends receivable from cell
captives from trade and other receivables and an increase in investments (long-term deposits) in Motor Related
Financial Services, partially offset by dividends received from the cell captives.
Other assets increased by 17% mainly due to an increase in deferred tax assets. The increase in the deferred tax asset
balance is mainly due to the deferred tax recognised on the re-measurement of foreign currency instruments in the
hedging reserve.
The decrease in other liabilities by 10% is mainly due to the settlement of the put option in Ecohealth.
In addition to attributable profits, shareholders' equity was impacted by:
- the strengthening of the Rand which resulted in a loss in the foreign currency translation reserve of R324 million;
- a decrease in the hedging reserve of R199 million; and
- the repurchase of ordinary shares totalling R113 million to hedge the share scheme (average price of
R212,49 per share).
The above was partially offset by capital raised from non-controlling interests.
Movement in equity for the six months to December 2017
R million HY1 2018
Net profit attributable to Imperial shareholders 1 306
Net profit attributable to non-controlling interests 61
Decrease in the foreign currency translation reserve (324)
Decrease in the hedge accounting reserve (199)
Movement in share-based reserve 14
Dividends paid (649)
Resolve Solutions and Ecohealth non-controlling
interest (Buy-out) (68)
Increase due to new acquisitions and non-controlling
interests capital injection (Surgipharm, Renault) 295
Non-controlling share of dividends (131)
Shares repurchased (113)
Total change 192
Cash flow
R million HY1 2018 HY1 2017 % change
Cash generated by operations before movements
in working capital 4 231 4 330 (2)
Movements in net working capital (excludes
currency movements and net acquisitions) (208) (2 379)
Cash generated after working capital movements 4 023 1 951
Interest paid (753) (823)
Tax paid (567) (660)
Cash generated by operations before capital
expenditure on rental assets 2 703 468 478
Capital expenditure on rental assets (1 161) (1 399)
Cash flows from operating activities 1 542 (931)
Net acquisitions of subsidiaries and businesses (1 042) (1 671)
Capital expenditure (non-rental assets) (265) (1 017)
Net movement in associates (204) 542
Equities, investments and loans (312) (109)
Dividends paid (781) (991)
Hedging of share scheme (357) (3)
Change in non-controlling interest (705) (89)
Other (90) 150
(Increase) in net debt (excludes currency
movements and net acquisitions) (2 214) (4 119)
Free cash flow 1 300 (451)
Free cash flow to headline earnings (times) 0,9 (0,3)
Cash generated by operations after working capital movements, interest and tax payments was R2,7 billion
(2017: R468 million).
Net working capital decreased compared to the prior period due to disciplined working capital management an increase
in the FEC liability due to the strengthening Rand and extended credit terms from suppliers in Motus.
Net capital expenditure reduced from R2,4 billion to R1,4 billion, down 41%. Capital expenditure in the prior year
included the majority of the contributions towards the chemical manufacturing plant and the additional convoys in
South America. The current year capital expenditure was reduced by the proceeds from the property disposals of
R606 million and reduced investment in vehicles for hire and properties in Motus.
Net debt increased by 15% or R2,2 billion (in line with expectations) from June 2017 but decreased by 13% or
R2,5 billion from December 2016.
The proceeds of the disposal of Schirm (~R2,0 billion) was received on 30 January 2018. Adjusted for this, net
debt at 31 December 2017 equates to R14,9 billion, bringing the net debt:equity ratio to 71%.
The main contributors to the net outflow of R1,0 billion relating to acquisitions and disposals were the acquisitions
of Surgipharm, Pentagon and SWT.
Outflows from equities, investments and loans amounted to R312 million, resulting mainly from:
- net increase in investments mainly from longer-term deposits in Motor Related Financial Services;
- net cash outflow on the settlement of Surgipharm warranty payment; and
- repayment of loans in Surgipharm and Ecohealth.
Dividends amounting to R781 million were paid during the period.
The change in non-controlling interest outflow mainly relates to cash paid for the purchase of a further 19% interest
in Ecohealth of R627 million.
Liquidity
The group's liquidity position is strong with R11,0 billion of unutilised banking facilities, excluding asset backed
finance facilities. 75% of the group debt is long term in nature and 41% of the debt is at fixed rates. The group's
international and national scale credit rating by Moody's is unchanged at Baa3 and Aa1.za.
Dividend
An interim cash dividend of 323 cents per ordinary share (2017: 320 cents per share) has been declared, in line
with our targeted pay-out ratio of 45% of HEPS, subject to prevailing circumstances. The prior period's dividend
was based on results including discontinued operations. The comparable dividend for HY1 2018 excluding discontinued
operations increased by 11%.
Board changes
Messrs Roboijane (Moses) Kgosana and Younaid Waja resigned as independent non-executive directors of the
Imperial board and from the various sub-committees and subsidiaries on which they served on 8 September 2017 and
13 October 2017 respectively. We thank them for their service to Imperial and wish both every success with their
future endeavours.
Prospects
We are encouraged by the quantitative and qualitative progress of Imperial. Over the past six months the group
has produced a satisfactory financial result in testing trading conditions, while approaching the advanced stages
of one of the most comprehensive organisation renewals by a South African based multinational.
Imperial’s 70th Anniversary coincides with a new more hopeful era of political leadership in South Africa.
The structural problems facing our country will not be solved easily or quickly, but we believe that President
Ramaphosa will model his office on the values, style and inclusive statesmanship of Nelson Mandela. This is evident
in the earliest days of his presidency and we will demonstrate full support for his declared agenda.
Our near term expectations are unchanged. We anticipate solid operating and financial results in the year to
June 2018, subject to stable currencies in the economies in which we operate, and South Africa retaining its
investment grade.
In the six months to June 2018 for continuing operations we expect:
- Capital efficiency to improve.
- Logistics and Motus to increase revenues and operating profit at a higher rate than the first half.
- Imperial Holdings to increase revenues and operating profit at a higher rate than the first half.
- Imperial Holdings to produce a double-digit growth in headline earnings per share substantially higher than
the first half, off the low base of 2017.
With thanks to all stakeholders, we will continue to execute on our espoused strategies.
Mark J Lamberti Mohammed Akoojee
Chief Executive Officer Chief Financial Officer
The forecast financial information herein has not been reviewed or reported on by Imperial's auditors.
Declaration of interim preference and ordinary dividends
for the six months ended 31 December 2017
Preference shareholders
Notice is hereby given that a gross interim preference dividend of 425,38356 cents per preference share has been
declared by the board of Imperial, payable to holders of 4 540 041 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 20%. The net preference dividend, to those
shareholders who are not exempt from paying dividend tax, is therefore 340,30685 cents per share.
Ordinary shareholders
Notice is hereby given that a gross interim ordinary dividend in the amount of 323,00000 cents per ordinary share
has been declared by the board of Imperial, payable to holders of 201 139 981 ordinary shares. The dividend will
be paid out of reserves.
The ordinary dividend will be subject to a local dividend tax rate of 20%. The net ordinary dividend, to those
shareholders who are not exempt from paying dividend tax, is therefore 258,40000 cents per share.
The company has determined the following salient dates for the payment of the preference dividend and ordinary
dividend:
2018
Last day for preference shares and ordinary shares respectively
to trade cum-preference dividend and cum ordinary dividend Monday, 19 March
Preference and ordinary shares commence trading ex-preference
dividend and ex-ordinary dividend respectively Tuesday, 20 March
Record date Friday, 23 March
Payment date Monday, 26 March
The company's income tax number is 9825178719.
Share certificates may not be dematerialised/re-materialised between Tuesday, 20 March 2018 and Friday,
23 March 2018, both days inclusive.
On Monday, 26 March 2018, 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 26 March 2018 will be posted on or about that date. Shareholders
who have dematerialised their shares will also have their accounts, held at their CSDP or Broker, credited
on Monday, 26 March 2018.
On behalf of the board
RA Venter
Group Company Secretary
19 February 2018
Condensed consolidated statement of profit or loss
for the six months ended 31 December 2017
Unaudited Unaudited Audited
six months six months financial year
ended ended ended
% 31 December 31 December 30 June
R million Notes change 2017 2016* 2017
Continuing operations
Revenue 11 66 520 59 727 116 839
Net operating expenses (62 167) (55 504) (108 261)
Profit from operations before depreciation
and recoupments 4 353 4 223 8 578
Depreciation, amortisation, impairments
and recoupments (1 260) (1 268) (2 529)
Operating profit 5 3 093 2 955 6 049
Recoupments from sale of properties,
net of impairments 11 7 212
Amortisation of intangible assets arising on
business combinations (226) (263) (521)
Foreign exchange losses (84) (121) (619)
Other non-operating items 6 (140) (80) (357)
Profit before net finance costs 6 2 654 2 498 4 764
Net finance costs 7 (9) (753) (828) (1 680)
Profit before share of result of associates
and joint ventures 1 901 1 670 3 084
Share of result of associates and joint ventures 41 49 103
Profit before tax 13 1 942 1 719 3 187
Income tax expense (575) (498) (901)
Profit for the period from continuing operations 12 1 367 1 221 2 286
Discontinued operations
Profit for the period from discontinued operations 163 279
Net profit for the period (1) 1 367 1 384 2 565
Net profit attributable to:
Owners of Imperial 1 306 1 331 2 601
- Continuing operations 1 306 1 200 2 373
- Discontinued operations 131 228
Non-controlling interests 61 53 (36)
- Continuing operations 61 21 (87)
- Discontinued operations 32 51
1 367 1 384 2 565
Earnings per share (cents)
Continuing operations
- Basic 9 671 618 1 221
- Diluted 8 652 604 1 187
Discontinued operations
- Basic 67 118
- Diluted 66 115
Total operations
- Basic (2) 671 685 1 339
- Diluted (3) 652 670 1 302
* Restated. Refer to note 3.1.
Condensed consolidated statement of comprehensive income
for the six months ended 31 December 2017
Unaudited Unaudited Audited
six months six months financial year
ended ended ended
31 December 31 December 30 June
R million 2017 2016* 2017
Net profit for the period 1 367 1 384 2 565
Other comprehensive loss (523) (1 191) (405)
Items that may be reclassified subsequently to profit or loss (523) (1 253) (521)
Exchange losses arising on translation of foreign operations (324) (836) (724)
Reclassification of gain on disposal of investment in associate (8) (8)
Movement in hedge accounting reserve (319) (462) 244
Income tax relating to items that may be reclassified
to profit or loss 120 53 (33)
Items that will not be reclassified to profit or loss 62 116
Remeasurement of defined benefit obligations 97 199
Income tax on remeasurement of defined benefit obligations (35) (83)
Total comprehensive income for the period 844 193 2 160
Total comprehensive income attributable to:
Owners of Imperial 806 267 2 209
Non-controlling interests 38 (74) (49)
844 193 2 160
* Restated. Refer to note 3.1.
Earnings per share information
for the six months ended 31 December 2017
Unaudited Unaudited Audited
six months six months financial year
ended ended ended
% 31 December 31 December 30 June
R million change 2017 2016* 2017
Headline earnings reconciliation
Earnings 1 306 1 331 2 601
Recoupment for disposal of property, plant
and equipment (IAS 16) (64) (39) (323)
Recoupment for disposal of intangible assets (IAS 38) 2 3
Impairment of property, plant and equipment (IAS 36) 27 32
Impairment of intangible assets (IAS 36) 9 30
Impairment of goodwill (IAS 36) 22 123
Impairment of investments in associates
and joint ventures (IAS 28) (6) 34
Loss on disposal of subsidiaries
and businesses (IFRS 10) 18 46 151
Impairment loss on assets of disposal groups 72
Reclassification of loss on disposal of
available-for-sale investment (IAS 39) (8) (8)
Tax effects of remeasurements 7 10 66
Non-controlling interests share of remeasurements 1 (9)
Headline earnings 1 397 1 337 2 700
Headline earnings per share (cents)
Continuing operations
- Basic 16 717 618 1 240
- Diluted 15 698 605 1 205
Discontinued operations
- Basic 70 150
- Diluted 68 146
Total operations
- Basic 4 717 688 1 390
- Diluted 4 698 673 1 351
Additional information
Net asset value per share (cents) 2 10 179 9 997 10 550
Dividend per ordinary share (cents) 1 323 320 650
Number of ordinary shares in issue (million)
- total shares 201,1 200,3 201,1
- net of shares repurchased 198,0 196,6 196,6
- weighted average for basic 194,7 194,2 194,3
- weighted average for diluted 200,2 198,7 199,8
Number of other shares (million)
- Deferred ordinary shares to convert
into ordinary shares 6,7 7,5 6,7
* Restated. Refer to note 3.1.
Condensed consolidated statement of financial position
at 31 December 2017
Unaudited Unaudited Audited
31 December 31 December 30 June
R million Notes 2017 2016* 2017
ASSETS
Goodwill and intangible assets 8 9 172 9 764 9 529
Investment in associates and joint ventures 1 204 922 1 002
Property, plant and equipment 9 667 10 134 10 371
Transport fleet 5 345 5 887 5 560
Deferred tax assets 1 736 1 405 1 509
Investments and other financial assets 1 213 441 805
Vehicles for hire 4 489 4 320 3 963
Inventories 16 803 16 377 16 953
Tax in advance 409 704 330
Trade and other receivables 14 606 14 017 13 353
Cash resources 2 758 2 349 4 499
Assets of disposal groups 11 3 097 7 016 979
Total assets 70 499 73 336 68 853
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share premium 1 030 1 030 1 030
Shares repurchased (547) (613) (574)
Other reserves (1 102) (108) 24
Retained earnings 20 773 19 346 20 262
Attributable to owners of Imperial 20 154 19 655 20 742
Put arrangement over non-controlling interests (521) (1 307) (1 148)
Non-controlling interests 820 927 667
Total equity 20 453 19 275 20 261
Liabilities
Non-redeemable, non-participating preference shares 441 441 441
Retirement benefit obligations 1 046 1 274 1 229
Interest-bearing borrowings 19 566 23 021 19 146
Maintenance and warranty contracts 2 953 3 033 3 022
Deferred tax liabilities 1 155 1 264 1 115
Other financial liabilities 1 275 2 154 1 952
Trade, other payables and provisions 22 525 19 271 21 350
Current tax liabilities 458 700 337
Liabilities of disposal groups 11 627 2 903
Total liabilities 50 046 54 061 48 592
Total equity and liabilities 70 499 73 336 68 853
* Restated. Refer to note 3.1.
Condensed consolidated statement of changes in equity
for the six months ended 31 December 2017
Put
arrangement
Share capital Attributable over non- Non-
and Shares Other Retained to owners controlling controlling Total
R million share premium repurchased reserves earnings of Imperial interests interests equity
At 30 June 2016 - Audited 1 030 (1 226) 1 003 19 366 20 173 (1 307) 909 19 775
Total comprehensive income for the period (1 127) 1 394 267 (74) 193
Net attributable profit for the period 1 331 1 331 53 1 384
Other comprehensive income (1 127) 63 (1 064) (127) (1 191)
Transfer of reserves on disposal
of Mix Telematics (109) 109
Movements in statutory reserve 11 (11)
Share-based equity cost charged to
profit or loss 63 63 63
Share-based equity reserve transferred to
retained earnings on vesting 68 (68)
Shares cancelled and delivered to settle
share-based obligations
Share-based equity reserve hedge cost 11 11 11
Ordinary dividend of 425 cents per
share in September 2016 (831) (831) (831)
Share cancellation of
7 864 456 ordinary shares 613 (613)
Non-controlling interest acquired, net of
disposals and shares issued 268 268
Net decrease in non-controlling
interests through buy-out (73) (73) (16) (89)
Realisation on disposal of subsidiaries 45 45 45
Non-controlling interests share of dividends (160) (160)
At 31 December 2016 - Unaudited and restated 1 030 (613) (108) 19 346 19 655 (1 307) 927 19 275
Total comprehensive income for the period 619 1 323 1 942 25 1 967
Net attributable profit for the period 1 270 1 270 (89) 1 181
Total other comprehensive income 619 53 672 114 786
Transfer of reserves on disposal
of Mix Telematics 1 (1)
Movements in statutory reserve
Share-based equity cost charged to
profit or loss 87 87 87
Share-based equity reserve transferred
to retained earnings on vesting 34 (34)
Shares cancelled and delivered to settle
share-based obligations 39 (39)
Share-based equity reserve hedge cost (233) (233) (233)
Ordinary dividend of 320 cents per
share in March 2017 (630) (630) (630)
Non-controlling interest acquired, net of
disposals and shares issued (149) (149)
Net decrease in non-controlling interests
through buy-out (94) (94) 159 (69) (4)
Realisation on disposal of subsidiaries (243) 258 15 15
Non-controlling interest share of dividends (67) (67)
At 30 June 2017 - Audited 1 030 (574) 24 20 262 20 742 (1 148) 667 20 261
Total comprehensive income for the period (500) 1 306 806 38 844
Net attributable profit for the period 1 306 1 306 61 1 367
Other comprehensive loss (500) (500) (23) (523)
Share-based cost charged to profit or loss 89 89 89
Share-based equity reserve transferred to
retained earnings 146 (146)
Share-based equity reserve hedge cost (74) (74) (1) (75)
Shares delivered to settle share-based
obligations 140 (140)
Repurchase of 533 772 shares at an average
cost of R212,49 per share (113) (113) (113)
Ordinary dividend of 330 cents per share
in September 2017 (649) (649) (649)
Non-controlling interests acquired,
net of disposals and shares issued 295 295
Net decrease in non-controlling interests
through buy-out (647) (647) 627 (48) (68)
Non-controlling interests share of dividends (131) (131)
At 31 December 2017 - Unaudited 1 030 (547) (1 102) 20 773 20 154 (521) 820 20 453
Condensed consolidated statement of cash flows
for the six months ended 31 December 2017
Unaudited Unaudited Audited
six months six months financial year
ended ended ended
% 31 December 31 December 30 June
R million Note change 2017 2016* 2017*
Cash flows from operating activities
Cash generated by operations before movements in net working capital 4 231 4 330 8 388
Movements in net working capital (208) (2 379) 688
Cash generated by operations before interest and taxes paid 106 4 023 1 951 9 076
Net finance cost paid (753) (823) (1 670)
Tax paid (567) (660) (1 520)
Cash generated by operations before capital expenditure on rental assets 2 703 468 5 886
Expansion capital expenditure - rental assets (417) (1 026) (1 118)
Net replacement capital expenditure - rental assets (744) (373) (591)
- Expenditure (2 312) (1 451) (3 422)
- Proceeds 1 568 1 078 2 831
Cash generated by operations after capital expenditure on rental assets 1 542 (931) 4 177
Cash flows from investing activities
Net acquisitions of subsidiaries and businesses (1 042) (1 671) (1 687)
Net expansion capital inflow (expenditure) - excluding rental assets 394 (471) 45
Net replacement capital expenditure - excluding rental assets (659) (546) (999)
Net movement in associates and joint ventures (204) 542 514
Net movement in investments, loans and other financial instruments (312) (109) 188
(1 823) (2 255) (1 939)
Cash flows from financing activities
Hedge cost premium paid (357) (3) (10)
Ordinary shares repurchased (113)
Dividends paid (781) (991) (1 688)
Purchase of non-controlling interests (705) (89) (252)
Capital raised from non-controlling interests 223 150 149
Settlement of cross currency swap instruments (200)
Net increase in interest-bearing borrowings* 570 4 386 613
(1 363) 3 453 (1 188)
Net (decrease) increase in cash resources (1 644) 267 1 050
Effects of exchange rate changes on cash resources in foreign currencies (31) (222) (224)
Cash resources at beginning of period* 4 499 3 673 3 673
Cash resources at end of period* 9 (24) 2 824 3 718 4 499
* Restated. Refer to note 3.2. The restatement to June 2017 has not been audited.
Notes to the condensed consolidated financial statements
for the six months ended 31 December 2017
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 2017 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 2017.
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 19 February 2018.
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 2017.
3. Restatement of prior periods
3.1 As a consequence of restating the group's June 2016 annual financial statements, as disclosed in the group's annual financial
statements for the year ended 30 June 2017, the December 2016 interim financial statements have been restated with the impact
of the restatements shown below.
STATEMENT OF FINANCIAL POSITION Rm
ASSETS
Investment in associates and joint ventures 7
Property, plant and equipment 137
Deferred tax assets 10
Investments and other financial assets 135
Tax in advance 2
Cash resources 10
Assets of disposal groups (296)
Total assets 5
EQUITY AND LIABILITIES
Retained earnings (40)
Attributable to owners of Imperial (40)
Non-controlling interest 45
Total equity 5
LIABILITIES
Trade and other payables and provisions 82
Liabilities of disposal group (82)
Total liabilities
Total equity and liabilities 5
3.1 Statement of profit or loss VAPS Error Total
restatement restatement restatement
Rm Rm Rm
Continuing operations
Revenue 36 36
Net operating expenses 40 40
Operating profit 36 40 76
Share of result of associates and joint ventures 2 2
Profit before tax 38 40 78
Income tax expense (8) (8) (16)
Profit for the period from continuing operations 30 32 62
Discontinued operations
Profit for the period from discontinued operations (30) (30)
Net profit for the period 32 32
Net profit attributable to:
Owners of Imperial 12 12
- Continuing operations 30 32 62
- Discontinued operations (30) (20) (50)
Non-controlling interest 20 20
- Continuing operations
- Discontinued operations 20 20
Statement of Comprehensive income
Net profit for the period 32 32
Total comprehensive income for the period 32 32
Total comprehensive income attributable to:
Owners of Imperial 12 12
Non-controlling interest 20 20
32 32
3.2 The December 2016 and the June 2017 statements of cash flows were restated to exclude short-term loans and overdrafts
from cash and cash equivalents. The movements in short-term loans and overdrafts are now reflected as cash flows under
financing activities as part of the net increase (decrease) in interest-bearing borrowings. The impact of the
restatement was as follows:
Statement of cash flows 31 December 30 June
2016 2017
Rm Rm
Financing activities
Net increase (decrease) in interest-bearing borrowings 1 968 (896)
1 968 (896)
4. New and revised International Financial Reporting Standards in issue but not yet effective
International Financial Reporting Standards that will become applicable to the group in future reporting periods
include IFRS 9 Financial Instruments (effective 1 January 2018), IFRS 15 Revenue from Contracts with Customers
(effective 1 January 2018) and IFRS 16 Leases (effective 1 January 2019). Details of these standards are outlined
in the 30 June 2017 annual financial statements. An update of the group's assessment of the potential impacts of
the new standards on the group's financial statements is as follows:
IFRS 9 - Financial Instruments. The group anticipates that the application of IFRS 9 may have minor impacts on
amounts reported in respect of the group's financial assets and financial liabilities. The group's doubtful debt
provisions are being examined as it will be based on expected credit losses and not incurred losses, but anticipates
that the impact is minor. The implementation will also simplify hedge accounting and result in increased disclosure.
The detailed review of the potential impact of IFRS 9 is ongoing.
IFRS 15 - Revenue From Contracts With Customers. A detailed review of the potential impact of IFRS 15 is ongoing.
The group, especially in the Logistics operations, has a substantial number of long-term contracts. All material
contracts are being assessed for any impact in terms of the five step approach. The initial review shows that there
should not be a material impact on the current measurement of revenue. The implementation will also result in
increased disclosure.
IFRS 16 - Leases. The group anticipates that the application of IFRS 16 will have a material impact on amounts reported,
resulting in the recognition of right-of-use assets and lease liabilities in respect of lease payments. A detailed review
of the potential impact of IFRS 16 is ongoing. The group has a substantial value of operating leases with an annual expense
of R2 225 million and operating lease commitments of R4 415 million. These contracts are in the process of being
individually analysed. The implementation will also result in increased disclosure.
31 December 31 December 30 June
2017 2016 2017
5. Foreign exchange rates
The following major rates of exchange were used in
the translation of the group's foreign operations:
SA Rand : Euro
- closing 14,77 14,40 14,92
- average 15,79 15,31 14,81
SA Rand : US Dollar
- closing 12,31 13,69 13,06
- average 13,43 13,96 13,58
SA Rand : Pound Sterling
- closing 16,64 16,89 17,02
- average 17,69 17,83 17,23
SA Rand : Australian Dollar
- closing 9,62 9,85 10,04
- average 10,45 10,52 10,24
31 December 31 December 30 June
R million 2017 2016 2017
6. Other non-operating items
Remeasurement of financial instruments
not held-for-trading 6 (2) (29)
Charge for remeasurement of put
option liability (25) (13) (39)
Remeasurement of contingent
consideration liabilities 31 3 2
Realised gain on disposal of
available-for-sale investments 8 8
Capital items (146) (78) (328)
Impairment of goodwill (22) (123)
Impairment of non-current receivable (20)
Profit (loss) on disposal of investments
in associates and joint ventures 6 (34)
Loss on disposal of subsidiaries and businesses (18) (46) (89)
Impairment loss on assets of disposal groups (72)
Business acquisition costs (14) (38) (82)
(140) (80) (357)
7. Net finance costs
Net interest paid (752) (823) (1 670)
Fair value loss on interest-rate swap instruments (1) (5) (10)
(753) (828) (1 680)
8. Goodwill and intangible assets
Goodwill
Cost 7 597 7 106 7 679
Accumulated impairments (1 007) (409) (985)
6 590 6 697 6 694
Carrying value at beginning of period 6 694 5 424 5 424
Net acquisition of subsidiaries and businesses 723 1 987 2 012
Impairment charge (22) (123)
Currency adjustments (198) (714) (619)
Reclassified to assets of disposal groups (607)
Carrying value at end of period 6 590 6 697 6 694
Intangible assets 2 582 3 067 2 835
Goodwill and intangible assets 9 172 9 764 9 529
9. Cash resources
Cash resources 2 758 2 349 4 499
Cash resources included in assets of
discontinued operations and of disposal groups 66 1 369
2 824 3 718 4 499
10. Fair value of financial instruments
10.1 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.
Total Level 2 Level 3
31 December 2017 Rm Rm Rm
Financial assets carried at fair value
Unlisted investments (Included in Investments) 637 637
Cross-currency and interest-rate swap instruments
(Included in Other financial assets) 22 22
Foreign exchange contracts and other derivative
instruments (Included in Trade and other receivables) 17 17
Financial liabilities carried at fair value
Put option liabilities (Included in Other financial liabilities) 934 934
Contingent consideration liabilities (Included in Other financial liabilities) 48 48
Cross currency swap instruments (Included in Other financial liabilities) 31 31
Foreign exchange contracts and other derivative instruments
(Included in Trade, other payables and provisions) 555 555
There were no transfers between the fair value hierarchies during the period.
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 instruments carried
at fair value at 31 December 2017.
Unlisted
R million investments Total
Financial assets
Carrying value at beginning of period 648 648
Fair valued through profit or loss 67 67
Cash receipts (78) (78)
Carrying value at the end of the period 637 637
Movements in level 3 financial instruments measured at fair value continued
Put option Contingent
liabilities consideration
R million liabilities Total
Financial liabilities
Carrying value at beginning of period 1 553 45 1 598
Arising on acquisition and disposal of businesses 92 92
Fair valued through profit or loss 25 (31) (6)
Settlements (627) (57) (684)
Currency adjustments (17) (1) (18)
Carrying value at the end of the period 934 48 982
Level 3 sensitivity information
The fair values of the level 3 financial instruments were estimated by applying an income approach valuation method
including a present value discount technique. The fair value measurements are 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, expected future cash flows 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 instruments as at 31 December 2017 would change
if the significant assumptions were to be replaced by a reasonable possible alternative.
Increase Decrease
Carrying in carrying in carrying
value value value
Financial instruments Valuation technique Key assumption Rm Rm Rm
Unlisted investments (asset) Income approach Present value of expected
cash flows 637 70 (74)
Put option liabilities Income approach Earnings growth 934 4 (7)
Contingent consideration
liabilities Income approach Assumed profits 48 (5)
10.2 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 2017 Rm Rm
Listed corporate bonds (included in interest-bearing borrowings) 4 316 4 279
Listed non-redeemable, non-participating preference shares 441 331
*Level 2 of the fair value hierarchy as derived from a market which is not considered active.
The fair values of the remainder of the group's financial assets and financial liabilities approximate their carrying values.
11. Assets and liabilities of the disposal groups
The assets and liabilities of the disposal groups relate to businesses in the Logistics division as well as land and
buildings that are held for sale. These assets will be recovered through disposal rather than through continuing use.
The amounts shown are net of inter-group eliminations.
Unaudited
31 December
R million 2017
Assets
Goodwill and intangible assets 737
Property 922
Plant and equipment 599
Transport fleet 72
Income tax assets 8
Investments and other financial assets 17
Inventories 252
Trade and other receivables 424
Cash resources 66
Assets of disposal groups 3 097
Liabilities
Income tax liabilities 45
Trade, other payables and provisions 582
Liabilities of disposal groups 627
31 December 31 December 30 June
R million 2017 2016 2017
12. Contingencies and commitments
Capital commitments 807 860 1 448
Contingent liabilities 510 723 649
13. Acquisitions and disposals during the period
Acquisitions
Please refer to page 34 for acquisitions during the period.
Disposals
Please refer to page 6 for disposals during the period.
14. Events after the reporting period
Disposal of Schirm GmbH
Please refer to page 6.
Dividend declaration
Shareholders are advised that a preference and an ordinary dividend has been declared by the board of Imperial on
19 February 2018. For more details please refer to the dividend declaration on page 19.
Business combinations during the period
Interest Purchase
acquired consideration
Businesses acquired Nature of business Operating segment Date acquired % Rm
Surgipharm Limited Markets and distributes Logistics African July 2017 70 490
pharmaceutical, medical, Regions
surgical and allied
supplies in Kenya
Pentagon Motor Holdings Headquartered in Derbyshire, Vehicle Retail August 2017 100 479
Limited England, operates 21 prime and Rental
retail dealerships for
numerous leading car and
van manufacturers
SWT Group Proprietary Based in Australia operates Vehicle Retail September 2017 75 261
Limited 16 car dealerships and Rental
1 230
Reasons for the acquisitions are outlined on page 6.
FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED AT DATE OF ACQUISITION*
R million Surgipharm Pentagon SWT Total
Assets
Intangible assets (excluding goodwill) 191 2 193
Property, plant and equipment 33 357 26 416
Deferred tax assets 10 10
Inventories 234 775 256 1 265
Trade and other receivables 280 423 48 751
Current tax assets 22 10 32
Cash resources 12 74 23 109
772 1 641 363 2 776
Liabilities
Deferred tax liabilities 37 4 41
Interest-bearing borrowings 82 69 240 391
Other financial liabilities 198 198
Trade and other payables and provisions 249 1 253 50 1 552
Current tax liabilities 8 8
566 1 326 298 2 190
Acquirees' carrying amount at acquisition 206 315 65 586
Non-controlling interests (62) (21) (16) (99)
Net assets acquired 144 294 49 487
Purchase consideration transferred 490 479 261 1 230
Cash paid 398 479 261 1 138
Contingent consideration 92 92
Excess of purchase price over net assets acquired 346 185 212 743
* The initial accounting for the business combinations is incomplete and based on provisional figures.
Details of contingent consideration
The contingent consideration requires the group to pay the vendors an additional total amount of R92 million over a
period of eighteen months if Surgipharm's net profit after tax exceeds certain profit targets.
Acquisition costs
Acquisition costs for business acquisitions concluded during the period amounted to R7 million and have been recognised
as an expense in profit or loss in the 'Other non-operating items' line.
Impact of the acquisition on the results of the group
From the dates of acquisition the businesses acquired during the period contributed revenue of R4 581 million, operating
profit of R59 million and after tax profit of R1 million. The after tax profit of R1 million includes the after tax impact
of the funding cost of R11 million calculated on the cash consideration paid on acquisitions and the amortisation of
intangible assets arising out of the business combinations of R17 million.
Had all the acquisitions been consolidated from 1 July 2017, they would have contributed revenue of R6 357 million, operating
profit of R22 million and after tax loss of R32 million. The group's total revenue for the period would have been
R68 296 million, operating profit would have been R3 056 million and after tax profit R1 336 million.
Separate identifiable intangible assets
As at the acquisition date the fair value of the separate identifiable intangible assets for Surgipharm was R191 million.
This fair value, which is classified as level 3 in the fair value hierarchy, was determined using the multi-period excess
earnings method (MEEM) valuation technique for contract based intangible assets and the relief-from-royalty method for
the brand name.
The significant unobservable valuation inputs were as follows:
%
Brand name
- Discount rate 17,4
- Royalty rate 0,75
Contract-based intangible assets
- Weighted average discount rates 15,0 - 15,8
- Terminal growth rate 5,6
The assumptions used in arriving at projected cash flows were based on past experience and adjusted for any
expected changes.
Other details
Trade and other receivables had gross contractual amounts of R825 million of which R74 million was doubtful.
Non-controlling interests have been calculated based on their proportionate share in the acquiree's net assets.
None of the goodwill is deductible for tax purposes.
Segment profit or loss
for the six months ended 31 December 2017
IMPERIAL LOGISTICS
Logistics Logistics Logistics
Imperial Holdings South Africa African Regions International
2017 2016 2017 2016 2017 2016 2017 2016
Rm Rm Rm Rm Rm Rm Rm Rm
Revenue 66 520 59 727 8 563 8 265 5 383 4 728 12 114 11 410
- South Africa 35 836 34 099 8 563 8 265
- Rest of Africa 6 169 6 177 5 383 4 728
- International 24 515 19 451 12 114 11 410
Operating profit 3 093 2 955 519 504 396 385 435 406
- South Africa 2 016 1 920 519 504
- Rest of Africa 466 455 396 385
- International 611 580 435 406
Depreciation, amortisation,
impairments and recoupments (1 475) (1 524) (269) (259) (149) (134) (327) (355)
- South Africa (900) (908) (269) (259)
- Rest of Africa (188) (156) (149) (134)
- International (387) (460) (327) (355)
Interest expense (753) (828) (145) (153) (119) (108) (126) (114)
- South Africa (444) (557) (145) (153)
- Rest of Africa (135) (121) (119) (108)
- International (174) (150) (126) (114)
Pre-tax profit 2 074 1 759 387 334 118 42 223 188
- South Africa 1 584 1 396 387 334
- Rest of Africa 153 92 118 42
- International 337 271 223 188
Additional segment information
Analysis of revenue by type
Sale of goods 40 187 34 738 540 553 4 412 3 605
Rendering of services 26 333 24 989 7 965 7 647 936 1 070 12 114 11 410
66 520 59 727 8 505 8 200 5 348 4 675 12 114 11 410
Inter-group revenue 58 65 35 53
66 520 59 727 8 563 8 265 5 383 4 728 12 114 11 410
Analysis of depreciation,
amortisation, impairments and
recoupments (1 475) (1 524) (269) (259) (149) (134) (327) (355)
Depreciation and amortisation (1 277) (1 298) (272) (262) (36) (49) (249) (262)
Recoupments and impairments 28 37 28 20 (17) (1) 12 8
Amortisation of intangible
assets arising on
business combinations (226) (263) (25) (17) (96) (84) (90) (101)
Associate income included in
pre-tax profits 41 49 3 1 6 16 16 8
Operating margin % 4,6 4,9 6,1 6,1 7,4 8,1 3,6 3,6
~ Previously included in Logistics South Africa.
^ Since the publication of the H1 2017 results there have been adjustments to the sub-divisions of Motus,
requiring the segmental report to be amended and the reported H1 2017 numbers to be restated as above.
These changes comprise reallocations of: appropriate eliminations to Motus out of group head office and
eliminations; the transfer of the African distributorship operations from the Vehicle Retail and Rental
sub-division to the vehicle Import and Distribution sub-division; and the transfer of Beekmans from the
Vehicle Import and distribution sub-division to Aftermarket parts sub-division. The above numbers are also
adjusted to include the VAPS business in Financial Services.
Segment profit or loss (continued)
for the six months ended 31 December 2017
IMPERIAL LOGISTICS
Businesses
held for sale Eliminations~ Total Logistics
2017 2016 2017 2016 2017 2016
Rm Rm Rm Rm Rm Rm
Revenue 1 026 1 507 (53) (48) 27 033 25 862
- South Africa 118 (53) (48) 8 510 8 335
- Rest of Africa 168 631 5 551 5 359
- International 858 758 12 972 12 168
Operating profit 38 11 3 (6) 1 391 1 300
- South Africa (37) 3 (6) 522 461
- Rest of Africa 12 7 408 392
- International 26 41 461 447
Depreciation, amortisation,
impairments and recoupments (26) (79) (3) (3) (774) (830)
- South Africa (3) (3) (272) (262)
- Rest of Africa (13) (7) (162) (141)
- International (13) (72) (340) (427)
Interest expense (1) (14) 32 (9) (359) (398)
- South Africa (6) 32 (9) (113) (168)
- Rest of Africa 1 (4) (118) (112)
- International (2) (4) (128) (118)
Pre-tax profit 29 (44) 36 (20) 793 500
- South Africa (42) 36 (20) 423 272
- Rest of Africa 11 2 129 44
- International 18 (4) 241 184
Additional segment information
Analysis of revenue by type
Sale of goods 499 7 5 4 959 4 662
Rendering of services 997 995 18 21 22 031 21 143
997 1 494 25 26 26 990 25 805
Inter-group revenue 29 13 (78) (74) 43 57
1 026 1 507 (53) (48) 27 033 25 862
Analysis of depreciation,
amortisation, impairments and
recoupments (26) (79) (3) (3) (774) (830)
Depreciation and amortisation (17) (38) (3) 7 (577) (604)
Recoupments and impairments 2 23 29
Amortisation of intangible
assets arising on
business combinations (9) (43) (10) (220) (255)
Associate income included in
pre-tax profits 25 25
Operating margin % 5,1 5,0
~ Previously included in Logistics South Africa.
^ Since the publication of the H1 2017 results there have been adjustments to the sub-divisions of Motus,
requiring the segmental report to be amended and the reported H1 2017 numbers to be restated as above.
These changes comprise reallocations of: appropriate eliminations to Motus out of group head office and
eliminations; the transfer of the African distributorship operations from the Vehicle Retail and Rental
sub-division to the vehicle Import and Distribution sub-division; and the transfer of Beekmans from the
Vehicle Import and distribution sub-division to Aftermarket parts sub-division. The above numbers are also
adjusted to include the VAPS business in Financial Services.
Segment profit or loss (continued)
for the six months ended 31 December 2017
MOTUS
Vehicle Import Vehicle Retail Aftermarket Motor Related
and Distribution and Rental Parts Financial Services
2017 2016^ 2017 2016^ 2017 2016^ 2017 2016^
Rm Rm Rm Rm Rm Rm Rm Rm
Revenue 10 043 9 117 32 359 28 175 3 354 3 125 1 083 965
- South Africa 9 542 8 395 20 717 20 916 3 336 3 109 1 083 965
- Rest of Africa 501 722 99 81 18 16
- International 11 543 7 178
Operating profit 303 286 814 784 205 190 465 458
- South Africa 280 256 624 609 206 191 465 458
- Rest of Africa 23 30 35 34 (1) (1)
- International 155 141
Depreciation, amortisation,
impairments and recoupments (307) (311) (366) (344) (16) (21) (86) (91)
- South Africa (303) (307) (297) (299) (16) (21) (86) (91)
- Rest of Africa (4) (4) (22) (12)
- International (47) (33)
Interest expense (171) (170) (261) (242) (31) (32) (20) (8)
- South Africa (161) (166) (204) (202) (31) (32) (20) (8)
- Rest of Africa (10) (4) (7) (5)
- International (50) (35)
Pre-tax profit 80 133 562 537 181 175 442 453
- South Africa 85 113 436 408 181 165 442 453
- Rest of Africa (5) 20 28 29 10
- International 98 100
Additional segment information
Analysis of revenue by type
Sale of goods 3 959 3 310 28 243 23 528 3 290 3 086
Rendering of services 115 (25) 3 583 3 073 1 1 540 375
4 074 3 285 31 826 26 601 3 291 3 087 540 375
Inter-group revenue 5 969 5 832 533 1 574 63 38 543 590
10 043 9 117 32 359 28 175 3 354 3 125 1 083 965
Analysis of depreciation,
amortisation, impairments and
recoupments (307) (311) (366) (344) (16) (21) (86) (91)
Depreciation and amortisation (297) (317) (380) (338) (20) (19) (86) (91)
Recoupments and impairments (10) 6 18 6
Amortisation of intangible
assets arising on
business combinations (4) (6) (2) (2)
Associate income included in
pre-tax profits 4 (2) 2 (1) 10 21 (2) 3
Operating margin % 3,0 3,1 2,5 2,8 6,1 6,1 42,9 47,5
~ Previously included in Logistics South Africa.
^ Since the publication of the H1 2017 results there have been adjustments to the sub-divisions of Motus,
requiring the segmental report to be amended and the reported H1 2017 numbers to be restated as above.
These changes comprise reallocations of: appropriate eliminations to Motus out of group head office and
eliminations; the transfer of the African distributorship operations from the Vehicle Retail and Rental
sub-division to the vehicle Import and Distribution sub-division; and the transfer of Beekmans from the
Vehicle Import and distribution sub-division to Aftermarket parts sub-division. The above numbers are also
adjusted to include the VAPS business in Financial Services.
Segment profit or loss (continued)
for the six months ended 31 December 2017
MOTUS
Businesses Head office
held for sale Eliminations Total Vehicles and eliminations
2017 2016^ 2017 2016^ 2017 2016^ 2017 2016
Rm Rm Rm Rm Rm Rm Rm Rm
Revenue 384 (7 161) (7 671) 39 678 34 095 (191) (230)
- South Africa 281 (7 161) (7 670) 27 517 25 996 (191) (232)
- Rest of Africa (1) 618 818
- International 103 11 543 7 281 2
Operating profit (4) (71) (72) 1 716 1 642 (14) 13
- South Africa (3) (74) (73) 1 501 1 438 (7) 21
- Rest of Africa 1 1 58 64 (1)
- International (1) 2 157 140 (7) (7)
Depreciation, amortisation,
impairments and recoupments (4) 80 75 (695) (696) (6) 2
- South Africa (4) 80 74 (622) (648) (6) 2
- Rest of Africa 1 (26) (15)
- International (47) (33)
Interest expense (9) 85 70 (398) (391) 4 (39)
- South Africa (8) 85 71 (331) (345) (44)
- Rest of Africa (1) (17) (10) 1
- International (1) (50) (36) 4 4
Pre-tax profit (18) 15 (3) 1 280 1 277 1 (18)
- South Africa (12) 13 7 1 157 1 134 4 (10)
- Rest of Africa 1 (11) 24 48
- International (6) 1 1 99 95 (3) (8)
Additional segment information
Analysis of revenue by type
Sale of goods 375 (264) (221) 35 228 30 078 (2)
Rendering of services 10 44 391 4 283 3 826 19 20
385 (220) 170 39 511 33 904 19 18
Inter-group revenue (1) (6 941) (7 841) 167 191 (210) (248)
384 (7 161) (7 671) 39 678 34 095 (191) (230)
Analysis of depreciation,
amortisation, impairments and
recoupments (4) 80 75 (695) (696) (6) 2
Depreciation and amortisation (6) 80 75 (703) (696) 3 2
Recoupments and impairments 2 14 8 (9)
Amortisation of intangible
assets arising on
business combinations (6) (8)
Associate income included in
pre-tax profits (1) 13 21 3 3
Operating margin % 4,3 4,8
~ Previously included in Logistics South Africa.
^ Since the publication of the H1 2017 results there have been adjustments to the sub-divisions of Motus,
requiring the segmental report to be amended and the reported H1 2017 numbers to be restated as above.
These changes comprise reallocations of: appropriate eliminations to Motus out of group head office and
eliminations; the transfer of the African distributorship operations from the Vehicle Retail and Rental
sub-division to the vehicle Import and Distribution sub-division; and the transfer of Beekmans from the
Vehicle Import and distribution sub-division to Aftermarket parts sub-division. The above numbers are also
adjusted to include the VAPS business in Financial Services.
Segment financial position
at 31 December 2017
IMPERIAL LOGISTICS
Logistics Logistics
Imperial Holdings South Africa African Regions
2017 2016 2017 2016 2017 2016
Rm Rm Rm Rm Rm Rm
Assets
Intangible assets 9 172 9 764 811 1 006 2 431 2 258
Property plant and equipment 9 667 10 134 1 350 826 346 642
Transport fleet 5 345 5 887 2 601 2 591 198 345
Vehicles for hire 4 489 4 320
Equity investments in associates 915 673 9 29 294 290
Inventories 16 803 16 377 356 327 1 423 1 245
Trade and other receivables 14 606 14 017 4 191 4 041 1 782 1 480
Investments 867 173 24 9
Cash resources 70 84
Operating assets 61 934 61 429 9 342 8 829 6 474 6 260
- South Africa 34 307 34 230 9 342 8 829
- Rest of Africa 7 173 7 197 6 474 6 260
- International 20 454 20 002
Liabilities
Retirement benefit obligations 1 046 1 274
Maintenance and warranty contracts 2 953 3 033
Trade and other payables and provisions 22 525 19 271 3 782 3 769 2 181 2 063
Other financial liabilities 341 417 29 64 171 79
Operating liabilities 26 865 23 995 3 811 3 833 2 352 2 142
- South Africa 15 057 14 217 3 811 3 833
- Rest of Africa 2 599 2 540 2 352 2 142
- International 9 209 7 238
Net working capital 8 884 11 123 765 599 1 024 662
- South Africa 5 943 8 232 765 599
- Rest of Africa 1 203 1 025 1 024 662
- International 1 738 1 866
Net debt 17 249 21 113 2 254 2 583 1 922 2 234
- South Africa 7 935 12 340 2 254 2 583
- Rest of Africa 2 123 2 471 1 922 2 234
- International 7 191 6 302
Net capital expenditure (1 426) (2 416) (347) (229) 237 (48)
- South Africa (1 288) (1 942) (347) (229)
- Rest of Africa 174 (84) 237 (48)
- International (312) (390)
* Restated "Vehicles for hire" and "Trade and other payables and provisions" by R423 million
for the omission of inter-group rental vehicles and payables. The restatement had no impact
on total Motus or the Groups main financial statements as the omission was an error between
the two segments within Motus.
~ Previously included in Logistics South Africa.
^ Since the publication of the H1 2017 results there have been adjustments to the sub-divisions
of Motus, requiring the segmental report to be amended and the reported H1 2017 numbers to be
restated as above. These changes comprise reallocations of: appropriate eliminations to Motus
out of group head office and eliminations; the transfer of the African distributorship operations
from the Vehicle Retail and Rental sub-division to the vehicle Import and Distribution sub-division;
and the transfer of Beekmans from the Vehicle Import and distribution sub-division to Aftermarket
parts sub-division. The above numbers are also adjusted to include the VAPS business in
Financial Services.
Segment financial position (continued)
at 31 December 2017
IMPERIAL LOGISTICS
Logistics Total
International Eliminations~ Logistics
2017 2016 2017 2016 2017 2016
Rm Rm Rm Rm Rm Rm
Assets
Intangible assets 4 735 5 636 4 3 7 981 8 903
Property plant and equipment 1 342 2 071 61 178 3 099 3 717
Transport fleet 2 580 2 990 5 379 5 926
Vehicles for hire
Equity investments in associates 146 153 449 472
Inventories 111 316 1 890 1 888
Trade and other receivables 3 594 3 769 60 105 9 627 9 395
Investments 5 5 (1) 28 14
Cash resources
Operating assets 12 513 14 940 124 286 28 453 30 315
- South Africa 124 286 9 466 9 115
- Rest of Africa 6 474 6 260
- International 12 513 14 940 12 513 14 940
Liabilities
Retirement benefit obligations 1 046 1 274 1 046 1 274
Maintenance and warranty contracts
Trade and other payables and provisions 3 395 3 261 161 274 9 519 9 367
Other financial liabilities 1 200 144
Operating liabilities 4 441 4 536 161 274 10 765 10 785
- South Africa 161 274 3 972 4 107
- Rest of Africa 2 352 2 142
- International 4 441 4 536 4 441 4 536
Net working capital 310 824 (101) (169) 1 998 1 916
- South Africa (101) (169) 664 430
- Rest of Africa 1 024 662
- International 310 824 310 824
Net debt 5 670 6 382 95 255 9 941 11 454
- South Africa 95 255 2 349 2 838
- Rest of Africa 1 922 2 234
- International 5 670 6 382 5 670 6 382
Net capital expenditure (210) (353) (4) 19 (324) (611)
- South Africa (4) 19 (351) (210)
- Rest of Africa 237 (48)
- International (210) (353) (210) (353)
* Restated "Vehicles for hire" and "Trade and other payables and provisions" by R423 million
for the omission of inter-group rental vehicles and payables. The restatement had no impact
on total Motus or the Groups main financial statements as the omission was an error between
the two segments within Motus.
~ Previously included in Logistics South Africa.
^ Since the publication of the H1 2017 results there have been adjustments to the sub-divisions
of Motus, requiring the segmental report to be amended and the reported H1 2017 numbers to be
restated as above. These changes comprise reallocations of: appropriate eliminations to Motus
out of group head office and eliminations; the transfer of the African distributorship operations
from the Vehicle Retail and Rental sub-division to the vehicle Import and Distribution sub-division;
and the transfer of Beekmans from the Vehicle Import and distribution sub-division to Aftermarket
parts sub-division. The above numbers are also adjusted to include the VAPS business in
Financial Services.
Segment financial position (continued)
at 31 December 2017
MOTUS
Vehicle Import Vehicle Retail Aftermarket Motor Related
and Distribution and Rental Parts Financial Services
2017 2016*^ 2017 2016^ 2017 2016^ 2017 2016^
Rm Rm Rm Rm Rm Rm Rm Rm
Assets
Intangible assets 125 94 691 377 360 361 5
Property plant and equipment 626 590 5 593 5 272 424 439 10 9
Transport fleet
Vehicles for hire 2 102 2 070 2 378 2 084 2 130 1 987
Equity investments in associates 35 (44) 57 39 298 120 53 80
Inventories 3 486 5 247 9 891 8 012 1 340 1 042 269 361
Trade and other receivables 2 172 2 750 3 057 2 621 614 597 354 745
Investments 4 4 842 220
Cash resources 70 84
Operating assets 8 550 10 711 21 667 18 405 3 036 2 559 3 733 3 486
- South Africa 8 061 9 903 13 714 13 326 3 016 2 543 3 733 3 486
- Rest of Africa 489 808 191 113 20 16
- International 7 762 4 966
Liabilities
Retirement benefit obligations
Maintenance and warranty contracts 2 842 2 942
Trade and other payables and provisions 5 477 5 377 8 726 6 880 1 045 809 644 598
Other financial liabilities 98 41 17 26 2 5
Operating liabilities 5 575 5 418 8 743 6 906 1 047 814 3 486 3 540
- South Africa 5 349 5 035 3 994 4 186 1 043 812 3 486 3 540
- Rest of Africa 226 383 16 13 4 2
- International 4 733 2 707
Net working capital 181 2 620 4 222 3 753 909 830 (21) 508
- South Africa 37 2 277 2 845 2 748 901 818 (21) 508
- Rest of Africa 144 343 29 8 8 12
- International 1 348 997
Net debt 1 187 5 569 6 095 3 078 716 706 (728) (893)
- South Africa 1 079 5 385 4 405 2 363 699 687 (728) (893)
- Rest of Africa 108 184 76 34 17 19
- International 1 614 681
Net capital expenditure (374) (714) (757) (892) (4) (251) (301) (578)
- South Africa (372) (712) (594) (822) (4) (250) (301) (578)
- Rest of Africa (2) (2) (61) (33) (1)
- International (102) (37)
* Restated "Vehicles for hire" and "Trade and other payables and provisions" by R423 million
for the omission of inter-group rental vehicles and payables. The restatement had no impact
on total Motus or the Groups main financial statements as the omission was an error between
the two segments within Motus.
~ Previously included in Logistics South Africa.
^ Since the publication of the H1 2017 results there have been adjustments to the sub-divisions
of Motus, requiring the segmental report to be amended and the reported H1 2017 numbers to be
restated as above. These changes comprise reallocations of: appropriate eliminations to Motus
out of group head office and eliminations; the transfer of the African distributorship operations
from the Vehicle Retail and Rental sub-division to the vehicle Import and Distribution sub-division;
and the transfer of Beekmans from the Vehicle Import and distribution sub-division to Aftermarket
parts sub-division. The above numbers are also adjusted to include the VAPS business in
Financial Services.
Segment financial position (continued)
at 31 December 2017
MOTUS
Head office
Eliminations Total Vehicles and eliminations
2017 2016*^ 2017 2016^ 2017 2016
Rm Rm Rm Rm Rm Rm
Assets
Intangible assets 1 1 1 182 833 9 28
Property plant and equipment (1) 1 6 652 6 311 (84) 106
Transport fleet (34) (39)
Vehicles for hire (2 121) (1 821) 4 489 4 320
Equity investments in associates (5) 438 195 28 6
Inventories (73) (155) 14 913 14 507 (18)
Trade and other receivables (1 258) (2 115) 4 939 4 598 40 24
Investments (1) 27 845 251 (6) (92)
Cash resources 70 84
Operating assets (3 458) (4 062) 33 528 31 099 (47) 15
- South Africa (3 506) (4 062) 25 018 25 196 (177) (81)
- Rest of Africa (1) 699 937
- International 49 7 811 4 966 130 96
Liabilities
Retirement benefit obligations
Maintenance and warranty contracts 21 102 2 863 3 044 90 (11)
Trade and other payables and provisions (3 169) (3 862) 12 723 9 802 283 102
Other financial liabilities 117 72 24 201
Operating liabilities (3 148) (3 760) 15 703 12 918 397 292
- South Africa (3 149) (3 760) 10 723 9 813 362 297
- Rest of Africa 246 398 1
- International 1 4 734 2 707 34 (5)
Net working capital 1 838 1 592 7 129 9 303 (243) (96)
- South Africa 1 839 1 592 5 601 7 943 (322) (141)
- Rest of Africa (1) 180 363 (1)
- International 1 348 997 80 45
Net debt 8 11 7 278 8 471 30 1 188
- South Africa (16) 11 5 439 7 553 147 1 949
- Rest of Africa 201 237
- International 24 1 638 681 (117) (761)
Net capital expenditure 295 611 (1 141) (1 824) 39 19
- South Africa 295 611 (976) (1 751) 39 19
- Rest of Africa (63) (36)
- International (102) (37)
* Restated "Vehicles for hire" and "Trade and other payables and provisions" by R423 million
for the omission of inter-group rental vehicles and payables. The restatement had no impact
on total Motus or the Groups main financial statements as the omission was an error between
the two segments within Motus.
~ Previously included in Logistics South Africa.
^ Since the publication of the H1 2017 results there have been adjustments to the sub-divisions
of Motus, requiring the segmental report to be amended and the reported H1 2017 numbers to be
restated as above. These changes comprise reallocations of: appropriate eliminations to Motus
out of group head office and eliminations; the transfer of the African distributorship operations
from the Vehicle Retail and Rental sub-division to the vehicle Import and Distribution sub-division;
and the transfer of Beekmans from the Vehicle Import and distribution sub-division to Aftermarket
parts sub-division. The above numbers are also adjusted to include the VAPS business in
Financial Services.
Glossary of terms
Net asset value per share - equity attributable to owners of Imperial divided by total ordinary shares in issue net of
shares 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 capital expenditure - is the aggregate of the expansion and replacement capital expenditure of rental assets and
non-rental assets.
Net working capital - is inventories plus trade and other receivables less trade and other payables and provisions.
Operating assets - total assets less loans receivable, tax assets, assets of discontinued operations, assets of
disposal group and cash resources in respect of non-financial services segments.
Operating liabilities - total liabilities less interest-bearing borrowings, tax liabilities, put option liabilities,
liabilities of discontinued operations and liabilities of disposal groups.
Operating margin (%) - operating profit divided by revenue.
Pre-tax profit - 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 (%) - this is the return divided by invested capital.
- return is calculated by reducing the operating profit by a blended tax rate, which is an
average of the actual tax rates applicable in the various jurisdictions in which Imperial
operates, increased by the share of result of associates and joint ventures.
- Invested capital is a 12-month average of - total equity plus non-redeemable,
non-participating preference shares plus interest-bearing borrowings less interest bearing
long-term receivables less cash resources in non-financial services businesses.
Weighted average - calculated by multiplying the cost of each capital component by its
cost of capital (WACC) (%) proportional weight, therefore: WACC = (after tax cost of debt % multiplied by average
debt weighting) + (cost of equity multiplied by average equity weighting). The cost of
equity is blended recognising the cost of equity in the different jurisdictions in which
Imperial operates. This is different from the prior year where a South African cost of equity
was used.
Corporate information
Directors
SP Kana# (Chairman), A Tugendhaft##, (Deputy Chairman), RJA Sparks# (Lead Independent Director),
MJ Lamberti (Chief Executive), M Akoojee (Chief Financial Officer), OS Arbee, P Cooper#, G Dempster#,
P Langeni#, MV Moosa##, T Skweyiya#, M Swanepoel
# Independent non-executive
##Non-executive
Company Secretary
RA Venter
Group 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
Rosebank Towers
15 Biermann Avenue, Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)
Sponsor
Merrill Lynch SA Proprietary Limited
The Place, 1 Sandton Drive
Sandton, 2196
The results announcement is available on the Imperial website: www.imperial.co.za
Date: 20/02/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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