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IPL - Imperial Holdings - Unaudited results for the six months ended
31 December 2007
Imperial Holdings Limited
Registration number (1946/021048/06)
Ordinary share code: IPL & ISIN: ZAE000067211
Preference share code: IPLP & ISIN: ZAE000088076
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
HIGHLIGHTS
- Headline earnings per share down 25% to 535,5 cents (19% down on continuing
operations)
- Revenue from continuing operations up 4% to R31,7 billion
- An attributable loss of R500 million following a once-off write down of
R848 million on the discontinuation of aviation and R690 million on the
discontinuation of commercial vehicle distribution
Overview of results
The disappointing growth in operating performance, with revenue up 4%, operating
profit up 2,3% and headline earnings per share down 25% was caused principally
by difficult trading conditions in the group`s consumer-led motor retailing and
related operations and weak investment returns on insurance portfolios. However,
the operating margin from continuing operations remained virtually unchanged at
7,3%.
Our logistics, leasing and capital equipment operations performed well, showing
good revenue and operating profit growth. Revenue in the car rental business
grew by 24%, but higher interest charges on a larger fleet and accident costs
impacted the bottom line.
Revenue in our motor dealership and distributorship businesses was 7% lower than
last year, while the combined operating margin of these operations declined from
4,5% to 3,7%. New vehicle unit sales were 18% lower than last year and used
vehicle sales were maintained. The decline in vehicle sales is a result of
consumer belt-tightening following eight consecutive 50 point interest rate
hikes between June 2006 and December 2007 and the introduction of the National
Credit Act (NCA) in June 2007. The NCA also negatively impacted on new business
in our vehicle related insurance companies, which further suffered from a weak
equity market causing gains in our investment portfolios to be R222 million
lower than last year.
Net finance charges were 46% higher due to higher interest rates and average
debt levels, which were 35% higher than the comparable period.
Income from associates, at R83 million, was down from R127 million, mainly due
to losses from our 49% holding in Renault. Our share of Imperial Bank`s profit
grew by 22% to R127 million.
The tax rate was unchanged at 31%.
Discontinuation of businesses
These results account for the discontinuation of our aviation and commercial
vehicle distribution businesses at an aggregate once-off loss of R1,538 billion.
The sale of the Air Contractors group has been concluded and the purchase
consideration of _22,5 million has been received. We are to receive repayments
of loans of _18,7 million in May this year. Negotiations for the sale of the
balance of the Aviation division are far advanced. In terms of these
negotiations, certain aircraft and funding obligations will remain with Imperial
for periods ranging from six months to five years. However, the whole division
(excluding NAC which is now reported in the Distributorships division) is now
treated as discontinued, and provision has been made for a loss on
discontinuation of this business amounting to R848 million. The losses mainly
stemmed from lower realisation values on aircraft, goodwill and deferred tax
asset write-offs, and provisions for anticipated losses on the sale of aircraft
spares.
Due to ongoing losses in our commercial vehicle distribution business,
Commercial Vehicle Holdings (CVH), and our conclusion that CVH`s business model
would continuously cause mispricing and overstocking due to long order lead
times, it was decided to discontinue this business. This business has been
poorly managed and decisive action has now been taken. Accordingly, we chose to
terminate the distributorship agreements for International, DAF, Renault trucks
and VDL buses. A loss of R690 million after tax has been provided on the
closure, which will arise from overhead costs in running down the business,
provisions against buy-back and trade-back agreements, ongoing maintenance
obligations, redundant spares inventories, and provisions for anticipated losses
on the disposal of surplus new and used vehicles.
The truck brand distributorships are being transferred to the original equipment
manufacturers (OEMs). We are working closely with the OEMs to ensure a smooth
handover and the group will continue to hold key dealerships for these brands.
In addition, we hold several strong commercial vehicle operations in our
Dealerships division.
Review of business
During the period, the Imperial board and executive management carefully
assessed the performance of the group and are taking corrective steps where
businesses have underperformed. A number of businesses are being sold or closed
where returns are viewed as inadequate.
Change in year end
In order to align the financial year end to the month end, it was decided to
change the company`s financial year end from 25 June to 30 June and the half
year end from 25 December to 31 December.
Cash flow and debt levels
Cash generated by operations for the period was 70% lower caused mainly by
unfavourable working capital movements of R2,5 billion compared to R230 million
last year. Net working capital in the Leasing and Capital Equipment division was
R1 052 million higher than at June 2007, primarily due to the establishment of
an inventory base for the new Terex and New Holland Construction distributorship
franchises. In the combined motor dealerships and distributorships businesses,
net working capital increased by R1 046 million since June and by R478 million
in Logistics.
As is typical from a slowdown in activity in motor retailing, working capital
levels increased as inventories built up beyond levels which are funded by
suppliers.
Net capital expenditure, at R2 819 million, was 19% higher with the main
contributors being Leasing and Capital Equipment, which responded to strong
demand for its open-cast mining services with R933 million in capital
expenditure. To a lesser extent, the Logistics and the Car Rental and Tourism
divisions incurred capital expenditure to increase their operational fleets.
The group`s net interest bearing debt increased from R11,1 billion to
R14,7 billion from June to December 2007 and the net debt/equity ratio increased
to 119% from 82% in June. Debt levels are seasonally higher in December than in
June, and the change in year end also contributed to higher debt on a
comparative basis.
The IPL2 bond of R1,2 billion, which matures tomorrow, will be settled by mainly
internal sources and the balance from existing bank facilities. Imperial has
significant unutilised liquidity facilities.
New initiatives
Several new initiatives are under way in Imperial Logistics International. These
include a new spare parts centre in Herten with a total capacity of 25 000 m?,
expansion of the terminal facilities in Cologne, doubling of terminal space in
Dusseldorf and Duisburg and the establishment of two new container terminals in
the Lower Rhine region. In addition Imperial Logistics International acquired
Food Tankers and Laabs, both liquid bulk transport companies in Europe, as well
as Rijnaarde, an inland waterway chartering company in the Netherlands. All
these initiatives started positively. In addition, a strategic alliance has been
formed with Toepfer and ThyssenKrupp in Deep Sea brokerage, pursuant to which a
30% interest in Brouwer Shipping was sold to each.
Other strategic initiatives
Leasing and Capital Equipment
As previously stated, the group has decided to refine its business focus and
reduce its exposure to capital intensive businesses. In addition to the
discontinuation of aviation referred to above, it was decided to unbundle the
leasing and capital equipment business to shareholders. The unbundling creates a
new entity with a sharp focus on capital intensive leasing and infrastructure
related activities which will be able to capitalise on fixed investment spending
and the demand for commodities. This business which will be named Eqstra,
consists of full maintenance leasing of passenger and light to medium commercial
vehicles and forklifts, as well as the rental and operation of earthmoving
equipment, primarily in open-cast mining and construction. It is also the
distributor of Toyota forklifts and Terex and New Holland Construction
equipment. It can operate on a standalone basis and attract higher financial
leverage than as a division of Imperial. Growth potential for the leasing
operations will thereby be unlocked, and debt levels in Imperial reduced with a
relatively small reduction in equity capital.
A detailed cautionary announcement regarding the unbundling will be published
separately.
Tourvest
We also announced our intention to dispose of our 66% interest in Tourvest
because we regard it as falling outside of our chosen frame of tourism
activities. Negotiations are in progress with more than one interested bidder
for the company.
Imperial`s future focus
Subsequent to the aforementioned transactions and the unbundling, Imperial will
be focused on logistics in southern Africa and Europe, car rental and related
tourism services and on motor vehicle importation, retailing and related
financial services on an integrated basis. The group has significant market
leading positions in each of these areas which will serve as a platform for
future value creation and growth. Returns on investment will be further enhanced
by an emphasis on service related operations, which are closely aligned to and
based on its core activities.
Skills development and social investment
A training centre has been established through a skills development and training
fund. The facility will be aimed at improving managerial and other skills levels
throughout the organisation and promote transformation. Formal leadership
training will start in March. In addition, two apprenticeship training centres
are being established, in Germiston and Cape Town, to recruit and improve the
technical ability of apprentices.
The social investment programmes of Imperial and its associate Ukhamba Holdings
are proving to be very successful. Three schools in Gauteng have been funded by
the Community Development Trust, with more than R10,5 million of financial
assistance. The schools are provided with comprehensive support for their
facilities, textbooks, teacher training and curriculum development services.
Health awareness among truck drivers is a critical priority to our group. More
than 16 clinics are supported and comprehensive health awareness programmes
exist.
Lereko Mobility
A negative fair value adjustment of R83 million has been made in respect of
Imperial`s investment in Lereko Mobility (Pty) Limited arising from the
reduction in value of Lereko Mobility`s 14,5 million shares in Imperial Holdings
to R104 per share, the market price at the close of the period under review.
The carrying value of Imperial`s investment in Lereko Mobility after the
abovementioned adjustment is R586 million. Any reduction in the Imperial share
price below R104, applied to Lereko Mobility`s 14,5 million shares will attract
a further fair value adjustment.
Imperial`s interest in Lereko Mobility was consolidated until November 2006.
Thereafter it was equity accounted because the company`s risk in the investment
was sufficiently low in view of the company`s share price to warrant
deconsolidation. The share price is now at a level where the investment may have
been required to be consolidated, but since the risk will now be shared between
Imperial and Eqstra, the equity accounting treatment will be maintained.
Divisional reports
Logistics
R`million 2007 2006 change
Revenue 8 516 7 321 16,3%
Operating profit 555 425 30,6%
Operating asset 9 846 8 201 20,1%
Operating margin (%) 6,5 5,8
South and southern Africa
Operating profit grew by 13,9%, on an increased margin of 8,0%, up from 7,9% a
year ago. The margin improvement is more significant in view of the fact that
revenue increased by R91 million due to a 31% higher fuel price, without an
increase in operating profit. Revenue grew by 12,4% to R4,6 billion.
The overall performance of the division was satisfactory, in spite of some
operational problems in isolated areas, as well as working capital being in
excess of desired levels. These are being addressed urgently.
The largest contributor to the division`s revenue, at 38%, was derived from the
FMCG sector. Our performance in this sector was good in the first half, but we
expect some decline in growth during the second half.
The division is steadily increasing its penetration into higher value added
services as the investment in the fleet increased at a slower rate than revenue
and operating profit.
Europe
Good growth in the German economy, particularly in the steel and automotive
sectors provided the platform for strong growth and expansion of Imperial
Logistics International.
The division had an excellent half year, despite the fact that the growth of 21%
in revenue and 83% in operating profit included results for seven months trading
due to the change in year end.
The inland waterway business, Imperial Reederei, and the bulk and container
terminals in Neska performed well. Panopa Logistics was satisfactory.
Leasing and Capital Equipment
R`million 2007 2006 change
Revenue 3 314 2 135 55,2%
Operating profit 635 415 53,0%
Operating asset 8 278 5 709 45,0%
Operating margin (%) 19,2 19,4
The division has continued its strong growth path of last year, reporting
increases in revenue of 55% and operating profit of 53%.
The strongest profit contribution came from the capital equipment business which
is engaged in contract open-cast mining operations, mainly in the platinum
industry. All the major contracts, situated in the Rustenburg area and at Ngezi
in Zimbabwe are performing well. Attractive new mining contracts of considerable
scale were won in the later part of the year. The plant hire division enjoyed
strong demand and high plant utilisation. The distribution of Terex and New
Holland Construction equipment has gained momentum. Terex sales of rigid trucks
and cranes to the construction sector were good and the sale of high value face
shovels to the mining sector contributed well to profit.
The passenger and commercial vehicle leasing business in the rest of Africa also
contributed well, although partially from the de-fleeting of contracts that have
terminated. Attractive new opportunities are being pursued in all areas of
operation, including Botswana, Nigeria, Rwanda and Swaziland.
Car Rental and Tourism
R`million 2007 2006 change
Revenue 1 362 1 097 24,2%
Operating profit 186 166 12,0%
Operating asset 2 232 1 895 17,8%
Operating margin (%) 13,7 15,1
Tourvest has been excluded from the divisional results since the investment is
now treated as a discontinued operation in view of the sale process under way.
There are still two tourism related interests in the division, Springbok Atlas
and Grosvenor Tours.
Revenue in the division grew by 24% and operating profit by 12%. After higher
interest charges due to an increase in the average fleet value of 15% and higher
interest rates, the pre-tax profit growth was confined to 5%. Revenue days
increased by 11%.
The car rental business managed to maintain operating margins despite fierce
pricing pressure and significant increases in accident costs.
A major brand repositioning is under way after the renewal of the Europcar
franchise agreement for a long period, as well as exclusive inbound and outbound
referral agreements with both the National and Alamo car rental brands.
Significant new business was gained with government departments, and in the
construction and energy sectors, and we remain the leading supplier of car
rental services to low cost airlines. The brand repositioning will facilitate
global partnerships.
Used car margins in Auto Pedigree were weaker due to generally weak trading
conditions in the motor market, although unit sales increased strongly. The
company`s technology platforms have been enhanced to allow consumers greater
opportunity to view product and apply for finance online.
Turnover in Springbok Atlas was up by 16% on last year and profitability was
good. The company is working very closely with the 2010 soccer organisers and
sponsors. The division is also developing new markets in China, Taiwan,
Portugal, Spain and the Middle East.
Distributorships
R`million 2007 2006 change
Revenue 8 318 9 323 (10,8%)
Operating profit 448 618 (27,5%)
Operating asset 7 787 7 479 4,1%
Operating margin (%) 5,4 6,6
Revenue in the division, which now consists of Associated Motor Holdings, NAC
and the South African and UK parts businesses, declined by 11% and operating
profit by 28%.
Associated Motor Holdings experienced difficult trading conditions due to higher
interest rates, the implementation of the NCA and negative economic factors
influencing customer confidence.
Renault, in which we hold a 49% equity accounted interest, performed poorly,
returning a loss to us of R87 million. Management changes were effected and
Imperial will in future take a more active role in the business.
Despite flat market conditions with possible further contraction in the short
term, we are optimistic that we have taken appropriate measures to streamline
the business to improve efficiencies and ensure that it continues to deliver
acceptable returns whilst exploring further opportunities for growth.
Results for the Australian Ford dealerships are improving, having achieved a
small operating profit.
NAC has been transferred into the Distributorships division following the
discontinuation of the Aviation division. The business performed well as
previous problem areas in the contracts and maintenance divisions have now been
rectified. Aircraft sales performed well and the order book is good.
The UK parts business, Multipart, was recently notified of the termination of a
significant contract, and we have been disappointed at the low number of
meaningful new contracts gained since acquisition. This would put pressure on
profitability, and accordingly, we are reviewing the future of our parts
distribution activities in the UK. The goodwill paid on this acquisition has
been impaired and it is likely that losses on discontinuation would be incurred.
Dealerships
R`million 2007 2006 change
Revenue 9 958 10 270 (3,0%)
Operating profit 223 268 (16,8%)
Operating asset 5 055 4 553 11,0%
Operating margin (%) 2,2 2,6
Revenue in the division, which now includes 24 commercial vehicle dealerships
and service centres in the UK, declined by 3% and operating profit by 17%.
Interest cost on higher borrowings was 48% higher, leaving pre-tax profit down
by 33%.
The decline is a direct result of pressure on the affordability of new and used
vehicles due to higher interest rates, as well as the introduction of the NCA.
The weak market also needs to be seen against three prior years of extraordinary
growth in vehicle sales.
Investment in facilities continued during the period in the knowledge that
increasing numbers of vehicles will need to be serviced following high sales
volumes in the recent past. This investment positions the group to expand the
after sales revenue stream.
Margins on used vehicles were weak, but are starting to improve as dealers have
now cleared over-valued stock caused by the sharp sales decline in the last six
months.
Demand for commercial vehicles remained high, especially in the extra heavy
category. We are well represented in these categories of vehicles, which are
expected to continue performing well.
A good performance has been achieved by the UK dealerships and we are satisfied
by the performance of Jurgens Caravans and Beekmans Canopies.
Insurance
R`million 2007 2006 change
Revenue 1 317 1 581 (16,7%)
Operating profit 202 375 (46,1%)
Operating asset 4 185 3 542 18,2%
Operating margin (%) 15,3 23,7
The combined premium income of Regent Insurance and Regent Life was 17,5% lower.
The decline in premium income is a result of the introduction of the NCA
(through which monthly policies are now written instead of annual or term
policies) and the downturn in the motor market.
Regent Insurance wrote R1,008 billion in gross premiums against R1,042 billion
in the comparable period, but the effect of the NCA was more pronounced in
Regent Life, where premium income at R272 million was down from R511 million
last year. This was in line with expectations. The number of policies written
declined sharply after the introduction of the NCA, but has since grown to
approach levels reached before the NCA introduction.
Underwriting results remained strong, with the combined insurance result being
62% higher than last year at R139 million. After investment income, which was
significantly down as a result of weak equity markets, operating income was 46%
lower at R202 million.
The investigation of the LOA and the FSB into previous practices followed in the
credit insurance industry is ongoing. A fine of R50 000 for non-disclosure has
been imposed by the LOA.
Dividend
In view of the loss for this period, the board has decided not to pay an interim
ordinary dividend but it intends to resume the normal dividend policy at year-
end.
Directorate
The board and all our employees were saddened by the death on 21 January 2008 of
our former CEO, Bill Lynch, who had served the group for 36 years. Our
condolences go to his family. His colleagues will miss him, as a friend and as a
mentor, and he will be remembered for the enormous contribution he made to the
development of the Imperial group.
We also announce the retirement from the board of Carol Scott and Phil Erasmus.
Carol was the founder of Imperial Car Rental and the Car Rental division in 1979
and Phil joined the group in 1995 with the acquisition of Tanker Services. He
headed up the Transport division until his retirement when he became a non-
executive director. We wish to thank Carol and Phil for the crucial roles they
have played in the development of the group.
Prospects
Trading conditions in the motor sector will remain difficult for the remainder
of the financial year and beyond, until the upward cycle in interest rates is
reversed. Whilst the Logistics and Leasing and Capital Equipment divisions have
continued to perform well, we expect growth in these divisions to slow down. The
Car Rental division will be affected by investment in the rebranding process.
With the discontinuation of the aviation and commercial vehicle distributorship
businesses and the unbundling of the Leasing and Capital Equipment division, the
group`s balance sheet will regain much capacity to facilitate the pursuit of
opportunities for further growth. The board believes that the three pillars on
which the group, after its present restructuring, will be built, namely
logistics, car rental and motor vehicle dealerships and distribution with their
related financial services, is a base that is exposed to strongly growing
sectors of the South African and global economies.
By order of the board
L Boyd, Chairman
HR Brody, Chief executive
AH Mahomed, Financial director
Declaration of distributions
Preference shareholders
Notice is hereby given that a preference dividend of 512,05 cents per preference
share has been declared payable to holders of non-redeemable, non-participating
preference shares.
The company has determined the following salient dates for the payment of the
preference dividend:
2008
Last day for preference
shares to trade cum-preference dividend Wednesday, 19 March
Preference shares commence
trading ex-preference dividend Thursday, 20 March
Record date Friday, 28 March
Payment date Monday, 31 March
Share certificates may not be dematerialised/rematerialised between Thursday, 20
March 2008 and Friday, 28 March 2008, both days inclusive.
On Monday, 31 March 2008, amounts due in respect of the preference dividend will
be electronically transferred to the bank accounts of certificated preference
shareholders who utilise this facility. For those who do not, cheques dated 31
March 2008 will be posted on or about that date. Preference shareholders who
have dematerialised their shares will have their accounts, held at their CSDP or
broker, credited on Monday, 31 March 2007.
Preferred ordinary shareholders (unlisted)
Notice is hereby further given that a capital distribution of 267,5 cents per
preferred ordinary share has been declared and is payable to preferred ordinary
shareholders recorded in the registers of the company at the close of business
on Thursday, 27 March 2008.
On Friday, 28 March 2008 the capital distribution will be electronically
transferred to the bank accounts of preferred ordinary shareholders.
On behalf of the board
RA Venter
Group company secretary
26 February 2008
Condensed income statement
Unaudited Unaudited Unaudited
2007 2006 2007
31 Dec 25 Dec % 25 Jun
For the half year ended 31 Rm Rm change Rm
December
CONTINUING OPERATIONS
Revenue 31 670 30 526 4 60 367
Net operating expenses (28 341) (27 398) (53 927)
Profit from operations before
depreciation and recoupments 3 329 3 128 6 440
Depreciation, amortisation and
recoupments (1 029) (879) (1 782)
Operating profit 2 300 2 249 2 4 658
Foreign exchange gains 58 11
Fair value gains (losses) to
foreign
exchange derivatives 14 (13) (11)
Fair value (losses) gains on other
financial instruments (83) 10 19
Exceptional items (5) 27 13
Profit before net financing costs 2 226 2 331 (5) 4 690
Net financing costs (542) (372) (753)
Income from associates and joint
ventures 83 127 236
Profit before taxation 1 767 2 086 (15) 4 173
Income tax expense 517 616 1 153
Profit from continuing operations 1 250 1 470 (15) 3 020
DISCONTINUED OPERATIONS (1 583) 106 93
- Trading (loss) profit from
discontinued operations (45) 106 93
- Fair value loss on discontinued (1 538)
operations
Net (loss) profit for the period (333) 1 576 3 133
Attributable to
Equity holders of Imperial
Holdings Limited (500) 1 429 2 776
Minority interest 167 147 337
(333) 1 576 3 113
Earnings per share cents cents cents
Ordinary shares
- Basic
Total (289,6) 764,0 (138) 1 470,5
Discontinued operations (852,1) 57,3 50,4
Continuing operations 562,5 706,7 (20) 1 420,1
- Diluted
Total (246,3) 700,5 (135) 1 337,4
Discontinued operations (781,1) 52,0 45,8
Continuing operations 534,8 648,5 (18) 1 291,6
Preferred ordinary shares
- Basic 267,5 89,4 356,0
Additional information Rm Rm Rm
Headline earnings reconciliation
Attributable (loss) profit (500) 1 429 2 776
Attributable to preferred ordinary
shareholders (39) (13) (52)
Attributable to ordinary (539) 1 416 2 724
shareholders
Profit on sale of property, plant
and equipment, net of taxation (25) (75) (173)
Impairment of property, plant and
equipment, net of taxation 3 26
Exceptional items, net of taxation 1 556 (22) (8)
Headline earnings 995 1 319 2 569
Headline earnings per share cents cents cents
- Basic
Total 535,5 712,1 (25) 1 386,9
Discontinued operations (15,1) 29,1 11,2
Continuing operations 550,6 683,0 (19) 1 375,7
- Diluted
Total 510,0 653,4 (22) 1 286,8
Discontinued operations (13,8) 26,5 10,2
Continuing operations 523,8 626,9 (16) 1 276,6
*Based on the weighted average
number of shares in issue for the
period
Net asset value per share (cents) 5 544,0 5 825,5 6 223,2
Number of ordinary shares
(million)
- in issue 189,2 186,7 186,7
- weighted average 185,8 185,3 185,2
Number of other shares in issue
(million)
- Preferred ordinary 14,5 14,5 14,5
- Deferred ordinary 16,7 19,2 19,2
Net finance cost Rm Rm Rm
Net interest paid 551 371 756
Foreign exchange loss (gain) on
monetary items 50 (15) 60
Fair value (gains) losses on
borrowings and interest swaps (59) 16 (63)
542 372 753
Exceptional items
Impairment of goodwill (44) (1) (14)
Profit on disposal of investments 39 28 42
in subsidiaries
Loss on closure of business (15)
(5) 27 13
Condensed balance sheet
Unaudited Unaudited Audited
2007 2006 2007
31 Dec 25 Dec 25 Jun
For the half year ended 31 December Rm Rm Rm
ASSETS
Intangible assets 997 1 024 1 238
Investments in associates and joint
ventures 2 373 2 458 2 732
Property, plant and equipment 5 693 5 003 5 441
Transport fleet 3 136 2 649 2 789
Leasing assets 5 690 6 707 6 990
Vehicles for hire 1 449 1 213 1 012
Deferred tax assets 593 394 450
Assets classified as held for sale 5 300
Other investments and loans 2 389 2 369 2 793
Other non-current financial assets 881 782 842
Inventories 7 717 8 177 9 436
Taxation in advance 120 215 140
Trade and other receivables 8 862 8 591 8 883
Cash resources 2 568 1 686 2 788
Total assets 47 768 41 268 45 534
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 241 1 212 876
Shares repurchased and consolidated
shares (1 995) (1 992) (1 955)
Other reserves 1 171 1 157 1 203
Retained earnings 11 877 11 344 12 397
Attributable to Imperial Holdings`
shareholders 11 294 11 721 12 521
Minority interest 1 009 820 946
Total shareholders` equity 12 303 12 541 13 467
Liabilities
Non-redeemable, non-participating
preference shares 441 300 441
Retirement benefit obligations 239 218 230
Interest-bearing borrowings 17 251 12 326 13 845
Liabilities under insurance contracts 1 604 1 515 1 722
Deferred tax liabilities 1 052 1 014 1 196
Liabilities directly associated with
assets held for sale 2 469
Other non-current financial liabilities 91 31 13
Trade and other payables and provisions 11 269 12 301 13 680
Current tax liabilities 1 049 1 022 940
Total liabilities 35 465 28 727 32 067
Total equity and liabilities 47 768 41 268 45 534
Capital commitments 1 035 770 1 426
Contingent liabilities 771 786 600
Discontinued operations
The following have been identified as disposal groups:
- Aviation division, except NAC, is to be disposed of in its entirety
- Assets of Commercial Vehicle Holdings (CVH) are being sold
- Tourvest, a JSE listed entity, subject to negotiations for sale
All associated assets and liabilities have been classified as discontinued
operations.
The prior year income statement and segment report has been reclassified for
discontinued operations and for certain divisional reclassifications.
Basis of preparation
This condensed consolidated financial information has been prepared in
accordance with IAS 34 - Interim Financial Reporting and has not been audited
or reviewed by our auditors.
The condensed consolidated financial information should be read in conjunction
with the audited annual financial statements for the year ended 25 June 2007.
Accounting policies
The accounting policies adopted in preparation of the condensed consolidated
financial information are consistent with those of the annual financial
statements for the year ended 25 June 2007. Circular 2007/08 issued by the South
African Institute of Chartered Accountants became applicable during the
reporting period.
This has the impact of excluding any realised gains or losses on our fleets from
headline earnings.
The prior year headline earnings per share figures have been restated
accordingly.
Executive share purchase scheme
The group has a loan receivable of R503 million owing by the executive share
purchase scheme to the company. The executives participating in the purchase
scheme are indebted to the Trust for this amount and have pledged 3 508 800
shares in Imperial Holdings as security. The outstanding loan balance is
interest bearing and dividends received are credited to the loan account. The
loan of each participant is to be settled within 10 years of the offer date, and
the company has the right, in certain circumstances, to extend the period for a
further five years. The value of the shares pledged at the reporting date
amounted to R365 million. No impairment charge has been recognised for the
possible shortfall, as it is likely that over the longer term the amount will be
recoverable. However interest amounting to R22 million for this period has not
been recognised in income.
Condensed cash flow statement
Unaudited Unaudited Audited
2007 2006 2007
31 Dec 25 Dec % 25 Jun
For the half year ended Rm Rm Change Rm
31 December
Cash flows from operating
activities
Cash generated by operations
before changes in working capital 3 419 3 442 6 786
Net working capital movements (2 459) (230) (775)
Cash generated by operations 960 3 212 (70) 6 011
Net financing costs (701) (498) (1 026)
Taxation paid (511) (727) (1 106)
Net cash flows from operating
activities (252) 1 987 (113) 3 879
Cash flows from investing
activities
Net disposal (acquisition) of
subsidiaries and businesses 58 (108) (462)
Expansion capital expenditure (1 867) (1 724) (2 616)
Net replacement capital
expenditure (952) (645) (1 208)
Investments, equities and loans (280) (397) (462)
Net cash flows from investing
activities (3 041) (2 874) (4 748)
Cash flows from financing
activities
Cash flow from financing
activities 108 864 1 513
Dividends paid (113) (80) (429)
Capital distribution (570) (462) (761)
Net cash flows from financing
activities (575) 322 323
Net decrease in cash and cash
equivalents (3 868) (565) (546)
Cash and cash equivalents at
beginning of year (2 189) (1 643) (1 643)
Cash and cash equivalents at end
of period (6 057) (2 208) (2 189)
Material acquisitions
The group did not make any individual acquisitions that are considered
material to the group`s results. The following amounts are disclosed:
Purchase Fair value Goodwill Contribution Profit
consideration of net since before
assets acquisition tax
acquired Revenue
Rm Rm Rm Rm Rm
New acquisitions 201 45 156 277 15
Condensed statement of changes in equity
Share Share
capital repurchase
and consolidated Other Retained
premium shares reserves earnings
Rm Rm Rm Rm
Balance at 25 June 2007 876 (1 955) 1 203 12 397
Net (losses) gains arising on
translation of foreign
operations (30)
Movement in hedge accounting
reserve (26)
Movement on share based
payment reserve 4
Net losses not recognised in
the income statement (52)
Net attributable (loss) profit
for the period (500)
Minority share of attributable
profits (continuing and
discontinued operations)
Net increase in minority
interest
Contingency reserve created in
terms of the Insurance Act 6 (6)
Transfer of Imperial Bank`s
credit risk reserve to
statutory reserve 14 (14)
Repurchase of ordinary shares (104)
Deconsolidation of Lereko
Mobility
Issue expenses (1)
Capital distribution (634) 64
Dividend
Minority share of dividends
Balance at 31 December 2007 241 (1 995) 1 171 11 877
Condensed statement of changes in equity
Minority Unaudited Unaudited Audited
interest 31 Dec 25 Dec 25 June
Rm 2007 2006 2007
Rm Rm Rm
Balance at 25 June 2007 946 13 467 10 787 10 787
Net (losses) gains arising on
translation of foreign
operations (30) 34 143
Movement in hedge accounting
reserve (6) (32) (535) (646)
Movement on share based payment
reserve 4 (63) (66)
Net losses not recognised in the
income statement (6) (58) (564) (569)
Net attributable (loss) profit
for the period (500) 1 429 2 776
Minority share of attributable
profits
(continuing and discontinued
operations) 185 185 170 378
Net increase in minority
interest (3) (3) 1 25
Contingency reserve created in
terms of the Insurance Act
Transfer of Imperial Bank`s
credit risk reserve to statutory
reserve
Repurchase of ordinary shares (104) (298) (298)
Deconsolidation of Lereko
Mobility 1 558 1 558
Issue expenses (1)
Capital distribution (570) (462) (761)
Dividend (263)
Minority share of dividends (113) (113) (80) (166)
Balance at 31 December 2007 1 009 12 303 12 541 13 467
Corporate information
Non-executive directors
L Boyd (chairman), TS Gcabashe (deputy chairman), PL Erasmus, P Langeni, MJ
Leeming, JR McAlpine, VJ Mokoena, PS Molefe, MV Moosa, CE Scott,
M Sisulu, RJA Sparks, A Tugendhaft, Y Waja
Executive directors
HR Brody (chief executive), OS Arbee, MP de Canha, RL Hiemstra, WS Hill,
N Hoosen, AH Mahomed, GW Riemann (German)
Company secretary
RA Venter
Business address and registered office
Imperial Place, Jeppe Quondam, 79 Boeing Road East, Bedfordview, 2007
Share transfer secretaries
Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall Street,
Johannesburg, 2001
Sponsor
Merrill Lynch SA (Pty) Limited, 138 West Street, Sandown Sandton, 2196
Please refer to Imperial Holdings website www.imperial.co.za for Segmental
Information.
Date: 27/02/2008 08:00:48 Produced by the JSE SENS Department.
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