MURPHY’s Law struck me again in the previous column. The sub- editors and I assiduously checked that all the commas and decimal points were right in the example of internal rate of return on Pick n Pay. However, I didn’t take into account my dysfunctional dyslexic keyboard.

In typing the answer for the internal rate of return, I typed 0,49393 instead of 0,14393, which correctly was 14,94%. I blushed over the whole weekend but am relieved no one e-mailed to aggravate my roseate cheeks. On Thursday, the column recorded that Jean’s and my investment in Imperial Holdings (Imperial) had provide an annual compound rate of return of 12,3% a year. On March 26, we received a dividend from Imperial. This increased the return but was offset by Imperial’s share price fall from March 16 ( the date at which I had calculated the return) to its closing share price on Friday. This is a gentle reminder that paper gains and losses are ephemeral. About a month ago, Imperial published its results for the half- year ended December 31 last year . I’ve read and reread the report several times since then. Mostly what the report has convinced me is that Imperial is in good shape relative to its environmental investment fundamentals.

The company was hit badly by the economic recession. The company seemed to be too diversified and management decided to streamline its operations and, in particular, unbundled Eqstra and decided it didn’t want to own Imperial Banking. Net gearing (the ratio of interest-bearing debt to equity) was reduced from 75% at the end of December 2008 to 50% at the end of June this year. This much leaner company has been acquiring businesses more integral or complementary to its core operations. Internal rate of return is interesting and meaningful. The measure I’m interested in, from the perspective of the performance of the Private Investor portfolio (and Jean’s and my other portfolios), is the bottom-line earnings per share on the stake invested in the companies in the portfolio. This measure, as I’ve often observed is not rock-fast reliable, especially as the definition of “bottom-line” tends to change as the business environment changes. In Imperial’s latest interim report, there is a particular graphic that engenders confidence for investors, the chart of half-year on half-year of headline earnings per share between 2000 and last year . The figures for 2007 to last year are based on continuing operations only and the chart illustrates its strong growth to a peak of more than 700c a share in the interim half of 2006.

There followed a bumpy ride in the 2007 and 2008 periods in which headline earnings per share stuck over 400c before improving in the latest half-year, last year, to 500c. There are many reasons to expect strong growth in sales and margins in the second half of this financial year and well into the next year. The share is now trading around R102, and forward headline earnings per share could well be in excess of 1 200c this year. The forward price-earnings ratio is, therefore, possibly 8,5, the earnings yield 12% and the dividend yield around 4%. This underlines why I suggested Imperial could have been the Power Ball for the High Yield portfolio.