Media Release
26 August 2009
IMPERIAL benefits from restructuring
IMPERIAL Holdings today reported sound results for the year ended on 30 June 2009, displaying strong capital management and cash flow, with headline earnings per share 13% higher than last year. Highlights include:
· HEPS from continuing operations 13% higher at 698 cents
· Cash generated by continuing operations 43% increased to R5,2 billion
· Revenue from continuing operations 7% lower at R52,2 billion
· Operating profit 16% dropped to R2,5 billion
· A strong balance sheet
· A final dividend of 120 cps
Commenting on the results, CEO Hubert Brody said: “We are pleased with these results which were achieved under very difficult economic conditions, particularly in the motor retailing environment. This set of results highlights how the group has benefited from the restructuring actions taken over the past two years and confirms the Group’s chosen focus areas of expansion: logistics, tourism and selected aspects of financial services”.
Revenue at R52,2 billion and operating profit at R2 453 million were 7% and 16% lower respectively. IMPERIAL’s results were marked by declining profits in the motor vehicle retailing divisions, dealerships and distributorships, which, combined, returned 13% less revenue and a 34% decline in operating profit, while revenue in the rest of the group rose by 3% and operating profit reduced by 4%. Associated Motor Holdings (AMH) responded effectively to the extremely weak motor retail market by cutting costs and closing unprofitable operations in the last quarter of 2008.
Revenue from services operations increased to R21.7 billion which demonstrates the magnitude of the annuity income streams that the group earns.
It has been an extremely difficult year for vehicle sales, especially the second half, during which the total market declined by 36%, while the commercial vehicle market dropped by 49%. The main driver behind the recent slump in vehicle sales has been reduced lending by vehicle finance banks, and to a lesser extent, lower demand. However, also in the consumer facing operations, the merger of Regent Insurance and Regent Life has been completed and an estimated annualised savings of R35 million has been achieved.
The group’s logistics operations in Europe performed well in the first half, but the global financial crisis caused a drastic decline in logistics volumes in the second half. The Southern African logistics business was less affected and did well to increase its operating profit by 5,3% with stronger margins. A number of valuable new contracts, won during the year, are taking up some of the slack created by lower demand. The company has decided to step up its transport fleet renewal in Zimbabwe.
During the year under review, the Logistics division in Southern Africa made a number of acquisitions, including 60% of Tip Trans Holdings and 100% of Crontrans. IMPERIAL Logistics International acquired Hansmann, a logistics provider to Volkswagen in Wolfsburg, Germany and Garex which provides similar services in Poland. A new division focusing on asset-light logistics operations is being created, which the company expects will further broaden its services interests.
The Car Rental and Tourism division maintained its operating profit in a tough year. The Europcar rebranding was a great success. Management is confident that Europcar will reap long term benefits from the spending on promotion, signage and technology which was absorbed in the current and prior year.
The contribution from the tourism businesses, which include Springbok Atlas, was unchanged as lower inbound tourist numbers were partially offset by good demand during the IPL cricket tournament and the Lions rugby tour. The coach fleet was expanded in anticipation of the FIFA World Cup next year and future tourism opportunities. The appointment of Moeketsi Mosolo, the former CEO of SA Tourism, is evidence of the Group’s intentions to build on our current tourism interests in a variety of ways.
Regent group which represents the majority of IMPERIAL’s insurance operations returned a much improved result notwithstanding weak returns on its investment portfolio. Performance from the commercial vehicle and Botswana operations were particularly pleasing while the sale of credit protection products continue to be under strain in the current motor car market. IMPERIAL recently appointed David Gnodde as CEO of the Regent group and is confident that the insurance operations can now be more outward looking after a period of consolidation.
Cash generated by continuing operations improved by 43% to R5 187 million and debt levels declined substantially. Net debt amounted to R5.1 billion compared to R8.5 billion a year ago, a decline of 39%. The ratio of net debt to equity was 50% compared to 81% last year and 75% at the interim stage.
Strong focus was placed on cash and liquidity management during the year with great success, as evidenced by the significant reduction in net debt and the extent of unutilised debt facilities.
A final dividend of 120 cents per share has been declared, which brings the total dividend for the year to 200 cents per share.
IMPERIAL and Nedbank Group have agreed, in principle, that Nedbank would acquire IMPERIAL’s 49,9% holding in IMPERIAL Bank for a consideration of R1 775 million. The sale will significantly enhance the cash generating capacity of the IMPERIAL group.
IMPERIAL has continued its focus on skills development and sustainability, with the completion of a training centre in Germiston for petrol and diesel mechanics. In addition, the IMPERIAL Ukhamba Community Development Trust supports three schools in under-privileged parts of Gauteng and has spent over R11 million at these schools since its inception.
Commenting on the Group’s prospects, Brody continued “The strategy to limit the Group’s relative exposure to the motor retailing industry continues. Far reaching steps have been taken to right-size our motor operations in line with our expectations for motor vehicle demand and our requirements for return on capital. The Southern African and European logistics industries will remain under pressure for most of the 2010 financial year, and we expect vehicle sales to remain weak in the year ahead. However, we are more optimistic about prospects than at the time of the release of the half year results in February, and are confident that IMPERIAL is well positioned to take advantage of the market upturn”.
ENDS