| Wed 25 Feb 2009, 7:05 | | IPL/IPLP - Imperial Holdings Limited - Unaudited results for the half-year ended |
|
IPL IPLP
IPL
IPL/IPLP - Imperial Holdings Limited - Unaudited results for the half-year ended
31 December 2008
Imperial Holdings Limited
(Registration number 1946/021048/06)
Ordinary share code: IPL ISIN: ZAE000067211
Preference share code: IPLP ISIN: ZAE000088076
- Revenue unchanged
- Operating profit 30% lower
- HEPS 4% lower
- Cash generated by operations 241% higher to R2,0 billion
- A stronger balance sheet
- An interim dividend of 80 cents
Condensed income statement
Unaudited
and
Unaudited restated Audited
31 Dec 31 Dec 30 Jun
2008 2007 % 2008
for the six months ended Rm Rm change Rm
December
CONTINUING OPERATIONS
Revenue 28 619 28 026 2 55 927
Net operating expenses (26 824) (25 867) (51 849)
Profit from operations
before depreciation
and recoupments 1 795 2 159 4 078
Depreciation, amortisation (640) (515) (1 086)
and recoupments
Operating profit 1 155 1 644 (30) 2 992
Foreign exchange gains 470 14 145
Fair value (losses) gains
to foreign
exchange derivatives (47) 7 1
Fair value losses on other (83) (496)
financial instruments
Exceptional items (246) 39 1
Profit before net 1 332 1 621 (18) 2 643
financing costs
Net finance cost (505) (321) (807)
Income from associates and 87 83 278
joint ventures
Profit before taxation 914 1 383 (34) 2 114
Income tax expense 246 390 707
Profit from continuing 668 993 (33) 1 407
operations
DISCONTINUED OPERATIONS 556 (1 308) (1 920)
- Trading (loss) profit (4) 274 349
from operations
- Fair value profit (loss) 560 (1 582) (2 269)
on discontinuation
Net profit (loss) for the 1 224 (315) (513)
period
Attributable to:
Equity holders of Imperial 1 155 (500) (870)
Holdings Limited
Minority interest - 68 85 162
continuing operations
Minority interest - 1 100 195
discontinued operations
1 224 (315) (513)
Earnings per share Cents Cents Cents
Ordinary shares
Basic
- Total 602 (290) (510)
- Discontinued operations 299 (758) (1 139)
- Continuing operations 303 468 (35) 629
Diluted
- Total 558 (246) (420)
- Discontinued operations 268 (695) (1 020)
- Continuing operations 290 449 (35) 600
Preferred ordinary shares
- Basic 268 268 535
Headline earnings Rm Rm Rm
reconciliation -
continuing and
discontinued operations
Attributable profit (loss) 1 155 (500) (870)
Attributable to preferred (39) (39) (78)
ordinary shareholders
Attributable to ordinary 1 116 (539) (948)
shareholders
Profit on disposal of (6) (33) (24)
property, plant and
equipment
Impairment of property, 7 4 5
plant and equipment
Exceptional items - 246 (39) (1)
continuing operations
Exceptional items included
in income
from associates 6
Exceptional items - (650) 1 864 2 605
discontinued operations
Taxation 90 (262) (310)
Minorities (2)
Headline earnings - basic 801 995 1 333
Attributable to preferred 39 39 78
ordinary shareholders
Headline earnings - 840 1 034 1 411
diluted
Headline earnings per cents cents cents
share
Basic
- Total 432 536 (19) 718
- Discontinued operations 86 103
- Continuing operations 432 450 (4) 615
Diluted
- Total 406 510 (20) 680
- Discontinued operations 1 78 92
- Continuing operations 405 432 (6) 588
Additional information
Net asset value per share 4 959 5 544 4 732
(cents)
Number of ordinary shares
(million)
- in issue 188 189 188
- weighted average 185 186 186
- weighted average for 207 203 207
diluted earnings
Number of other shares in
issue (million)
- Preferred ordinary 15 15 15
- Deferred ordinary 17 17 17
Net finance cost Rm Rm Rm
Net interest paid 443 330 848
Foreign exchange loss on 133 50 376
monetary items
Fair value gains on
borrowings and
interest rate swaps (71) (59) (417)
Net finance cost - 505 321 807
continuing operations
Net finance cost - 85 380 660
discontinued operations
Exceptional items - Rm Rm Rm
continuing operations
Impairment of goodwill (15) (47)
(Loss) profit on disposal (14) 39 48
of investments in
subsidiaries, associates
and joint ventures
Loss on sale of Eqstra (217)
shares
(246) 39 1
Exceptional items - Rm Rm Rm
discontinued operations
Profit on sale of Tourvest 575
Fair value gain (loss) on 75 (848) (1 341)
Aviation disposal group
Fair value loss on CVH (972) (972)
disposal group
Goodwill impairment (44)
Net loss on sale of (292)
subsidiaries
Taxation (90) 282 336
Fair value profit (loss) 560 (1 582) (2 269)
on discontinuation
Condensed balance sheet
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2008 2007 2008
at 31 December Rm Rm Rm
ASSETS
Intangible assets 1 084 997 897
Investments in associates and joint ventures 2 388 2 373 2 017
Property, plant and equipment 6 025 5 693 5 681
Transport fleet 3 722 3 136 3 465
Leasing assets 329 5 690 337
Vehicles for hire 1 472 1 449 1 286
Deferred tax assets 526 593 637
Other investments and loans 1 701 2 389 2 320
Other non-current financial assets 367 881 330
Inventories 6 052 7 717 6 442
Taxation in advance 97 120 111
Trade and other receivables 6 834 8 862 6 821
Cash resources 3 160 2 568 3 148
Assets classified as held for sale 1 478 5 300 4 440
Total assets 35 235 47 768 37 932
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 10 241 10
Shares repurchased (1 816) (1 995) (1 816)
Other reserves 834 1 171 1 273
Retained earnings 11 029 11 877 10 138
Attributable to Imperial Holdings` shareholders 10 057 11 294 9 605
Minority interest 543 1 009 811
Total shareholders` equity 10 600 12 303 10 416
Liabilities
Non-redeemable, non-participating preference 441 441 441
shares
Retirement benefit obligations 310 239 286
Interest-bearing borrowings 11 064 17 251 11 599
Insurance and investment contracts 1 529 1 604 1 535
Deferred tax liabilities 573 1 052 549
Other non-current financial liabilities 83 91 98
Trade and other payables 9 387 11 269 10 065
Current tax liabilities 608 1 049 586
Liabilities directly associated with assets held 640 2 469 2 357
for sale
Total liabilities 24 635 35 465 27 516
Total equity and liabilities 35 235 47 768 37 932
Capital commitments 502 1 035 509
Contingent liabilities 535 771 595
Condensed cash flow statement
Unaudited
and
Unaudited restated Audited
31 Dec 31 Dec 30 June
2008 2007 2008
for the six months ended December Rm Rm Rm
Cash generated by operations before changes
in working capital 2 535 3 419 6 077
Net working capital movements (154) (2 459) (388)
Cash generated by operations 2 381 960 5 689
Cash generated by operations - continuing 2 030 596 3 633
businesses
Cash generated by operations - discontinued 351 364 2 056
businesses
Net financing costs (528) (701) (1 426)
Taxation paid (335) (511) (1 396)
Net cash flows from operating activities 1 518 (252) 2 867
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds (expenditure) from discontinued 1 301 (1 046) 3 123
operations
- Sale of Tourvest 1 003
- Sale of Safair Lease Finance 337
- Net capital expenditure (39) (1 046) (2 384)
-
Net unbundling and disposal of subsidiaries and 5 507
businesses
Proceeds (expenditure) from continuing operations
-
Net (acquisition) disposal of subsidiaries
and businesses (343) 58 (135)
- Expansion capital expenditure (509) (1 303) (1 595)
- Net replacement capital expenditure (664) (470) (1 017)
- Investments, equities and loans 315 (280) 680
Net cash flows from investing activities 100 (3 041) 1 056
CASH FLOWS FROM FINANCING ACTIVITIES
Hedge cost of share options (135) (67)
Dividends paid (555) (113) (225)
Capital distribution (570) (607)
Purchase of treasury stock net of transfers
from share purchase trust (10)
(Decrease) increase in long term borrowings (225) 108 (1 165)
Net cash flows from financing activities (915) (575) (2 074)
Net increase (decrease) in cash and cash 703 (3 868) 1 849
equivalents
Condensed statement of changes in equity
Share Shares Other Retained
capital
and premium repurchased reserves earnings
for the six Rm Rm Rm Rm
months
ended December
Balance at 30 10 (1 816) 1 273 10 138
June 2008
Net (losses) (287)
gains arising
on translation
of foreign
operations
Movement in 53
hedge
accounting
reserve
Realisation of 115
reserves on
disposal of
assets
Transfer of (242) 242
reserves on
disposal of
assets
Net unrealised
gains on
investments
Revaluation of 19
Lereko
Mobility call
option
Share option (135)
hedging cost
Net (losses) (477) 242
profits not
recognised in
the income
statement
Net 1 155
attributable
profit (loss)
for the period
Minority share
of
attributable
profits
Net decrease
in minority
interest
Contingency 6 (6)
reserve
created in
terms of the
Insurance Act
Unbundling of
the Leasing
and Capital
Equipment
division
Movement in 32
share-based
equity
Purchase of
ordinary
shares
Share issue
expenses
Dividends and (500)
capital
distributions
Minority share
of dividends
Balance at 31 10 (1 816) 834 11 029
December 2008
(... continued)
Condensed statement of changes in equity
Minority Unaudited Unaudited Audited
interest 31 Dec 31 Dec 2007 30 Jun
2008 2008
for the six Rm Rm Rm Rm
months
ended
December
Balance at 30 811 10 416 13 467 13 467
June 2008
Net (losses) (2) (289) (30) 234
gains arising
on
translation
of foreign
operations
Movement in (4) 49 (32) 30
hedge
accounting
reserve
Realisation 115
of reserves
on disposal
of assets
Transfer of
reserves on
disposal of
assets
Net 167
unrealised
gains on
investments
Revaluation 19 (238)
of Lereko
Mobility call
option
Share option (135) 4 (62)
hedging cost
Net (losses) (6) (241) (58) 131
profits not
recognised in
the income
statement
Net 1 155 (500) (870)
attributable
profit (loss)
for the
period
Minority 69 69 185 357
share of
attributable
profits
Net decrease (276) (276) (3)
in minority
interest
Contingency
reserve
created in
terms of the
Insurance Act
Unbundling of (1 722)
the Leasing
and Capital
Equipment
division
Movement in 32 (5)
share-based
equity
Purchase of (104) (109)
ordinary
shares
Share issue (1) (1)
expenses
Dividends and (500) (570) (607)
capital
distributions
Minority (55) (55) (113) (225)
share of
dividends
Balance at 31 543 10 600 12 303 10 416
December 2008
Material acquisitions
The group did not make any individual acquisitions that are
considered material to the group results. The following amounts
are disclosed:
Fair Contribution
value of since
acquisition
Purchase net Goodwill Revenue Profit
consideration assets before
acquired tax
Rm Rm Rm Rm Rm
New 180 150 30 277 14
acquisitions
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited condensed consolidated interim financial information ("interim
financial information") announcement for the six months ended 31 December 2008
was prepared in accordance with IAS 34 - Interim Financial Reporting and in
compliance with the listing requirements of the JSE Limited and the South
African Companies Act (1973).
The accounting policies are consistent with those of the previous financial
period and comply with International Financial Reporting Standards (IFRS).
These financial statements do not include all the information required for full
annual financial statements and should be read in conjunction with the
consolidated financial statements as at and for the period ended 30 June 2008.
These financial statements have not been reviewed or audited by the group`s
auditors.
The condensed consolidated financial statements were approved by the board of
directors on 24 February 2009.
2. Discontinued operations
The following have been identified as disposal groups:
Aviation division, excluding NAC, sale concluded in December 2008
Assets of Commercial Vehicle Holdings (CVH) are being realised
Tourvest, a previously JSE-listed entity, was disposed of in September 2008
Leasing and Capital Equipment division, was unbundled in May 2008
Imperial Multiparts (UK), was disposed of in May 2008
All associated assets and liabilities have been classified as discontinued
operations.
The 31 December 2007 income statement and segment reports have been restated for
the additional discontinuation of the Leasing and Capital Equipment division and
Imperial Multiparts (UK). The impact on revenue and operating profit is as
follows:
Operating
Revenue profit
Rm Rm
As stated before - continuing 31 670 2 300
Adjusted for:
- Leasing and Capital Equipment (3 314) (635)
- Imperial Multiparts (UK) (564) (21)
- Eliminations 234
Restated 28 026 1 644
OVERVIEW OF RESULTS
The results for the first half of our 2009 financial year are disappointing, but
when viewed against the extremely difficult trading conditions in our automotive
related businesses, the group`s performance was reasonable, given the strong
performance by the Logistics Division and good cash generation.
Group operating profit of R1 155 million from continuing operations was 29,7%
lower than the comparative period, and headline earnings per share (HEPS) from
continuing operations were 4,0% lower at 432 cents. Cash generated by continuing
operations improved by 241% to R2 030 million for the six months.
HEPS include a foreign exchange gain of R394 million (212 cents per share) which
was earned from the repatriation of capital from our European operations.
Excluding the effect of this item, continuing HEPS would have been 51,1% lower
than the previous period. The decline stemmed primarily from the motor vehicle
retailing operations and declines in the market value of the equity portfolios
of the insurance division.
The group`s logistics operations in southern Africa and in Europe performed
well, returning growth in operating profit of 13,6% and 9,1% respectively, while
operating profit from the motor vehicle retailing and distribution businesses
suffered and were 48,8% lower on a combined basis. Insurance operating profit
was 61,9% down, mainly due to the weak equity markets. Car rental and tourism
was 12,4% down at the operating level.
Revenue was 2,1% higher at R28,6 billion, although the combined motor retail
businesses posted a 6,5% reduction in revenue and the combined logistics
operation increased revenue by 17,4%. The operating margin from continuing
operations declined from 5,9% to 4,0%, mainly due to the vehicle retailing
operations, which contributed 58% of group revenue, but only 29% of group
operating profit. Operating margins in logistics were largely maintained while
margins in the car rental division were slightly down.
Net finance charges on continuing operations were 57,3% higher at R505 million.
The main contributor to the increase is the fact that, in the comparative
period, interest was recovered on all the funding to the discontinued
operations, whereas in this period, interest was only recovered from
discontinued operations on the recoverable portion of such funding, which was
R1,7 billion lower. Fair value adjustments on interest rate swaps and higher
interest rates also contributed to the increase.
Income from associates was marginally higher but included a 38,8% decline in the
contribution from Imperial Bank to R78 million. The contribution from Imperial
Bank is viewed as satisfactory in a very challenging banking environment.
Negative fair value adjustments were made in Ukhamba Holdings on its equity
holdings in Eqstra Holdings Limited (Eqstra) and Distribution and Warehousing
Network Limited. No losses were recognised in the current period from the
Renault joint venture.
Earnings per share (EPS) amounted to 602 cents compared to a loss of 290 cents.
The following exceptional items affected EPS:
The current period included the profit on the disposal of Tourvest of R485
million (261 cents),
A loss of R217 million (117 cents) on the disposal of ordinary shares in Eqstra
which were received on the unbundling of Eqstra in respect of Imperial treasury
shares.
Inclusion in the comparative period of a provision for losses on the sale of the
bulk of the aviation division of R848 million (456 cents), and
A provision for losses on the discontinuation of the commercial vehicle assembly
and distribution business, Commercial Vehicle Holdings (CVH) of R690 million
(371 cents).
Net interest-bearing debt (excluding preference shares) at R7,9 billion is
significantly lower than the R14,7 billion at December 2007, and shows a
reduction of R547 million from the level at June 2008. Traditionally, debt
levels are seasonally high in December. Net gearing stands at 74,6% compared to
119,3% at December 2007 and 81,1% at June 2008. R1?003 million and R337 million
were received on the disposals of Tourvest and the aviation business
respectively and R227 million was received on the disposal of Eqstra shares.
Business conditions in our markets
Trading conditions in the motor retail market were extremely tough throughout
the period, and deteriorated further towards the latter part. High interest
rates added to the increased cost of living to make the affordability of vehicle
purchases difficult for consumers. In addition, in the latter half of the
period, banks began to limit their lending in response to the global financial
crisis. Volumes and margins in the motor retail and distribution businesses were
adversely affected as a significant portion of overhead costs in these
businesses is fixed. The used car market proved to be more resilient than the
new car market.
Lower vehicle sales also reduced the premium flow in the group`s insurance
businesses in addition to the pressures on profitability brought about by the
introduction of the National Credit Act 18 months ago, as well as the weak
equity markets.
Although there was a slowdown in some sectors of our Southern African Logistics
division, business volumes generally held up well, especially in the fast-moving
consumer goods (FMCG) sector. Lower fuel prices assisted margins and helped to
ease the cost pressure for our customers.
Whilst trading conditions for our European Logistics business were strong during
the earlier part of the period, conditions became very challenging during
December particularly where we are exposed to heavy industries and motor vehicle
manufacturing.
The tourism and travel market was tough and had a negative effect on our car
rental operations. The global financial crisis resulted in fewer foreign
tourists visiting the country.
Discontinued operations
Major restructuring was undertaken during 2008 and was concluded during the
period with the sale of the aviation division becoming unconditional.
Discontinued operations now consist of the remaining gross assets of the
aviation division and CVH of R852 million and R626 million respectively. Since
June 2008 gross aviation assets reduced by R626 million and assets in CVH by
R726 million. The investment in and loan to Tourvest were sold and collected.
Liabilities associated with discontinued operations reduced by R1?717 million to
R640 million. We expect that by the end of the financial year, the sale of the
CVH assets will be close to completion and that a further approximately R150
million of the aviation assets will have been sold or realised. The balance of
the aviation assets will be realised over the next five years. Acceptable
returns are being earned on the carrying values of the remaining aviation
assets.
Balance sheet
Gross assets declined by R2,7 billion since June 2008. The bulk of the decline
was in the discontinued operations where the assets of Tourvest, as well as the
aviation and CVH assets were reflected. Inventories declined by R390 million and
accounts receivable remained stable. However, trade payables and provisions for
liabilities declined by R678 million. Investments and loans declined by R619
million, mainly due to the drop in the value of equity investments in the
insurance division as well as divestments from the portfolios.
The group invested a further R225 million of capital into Imperial Bank to
support its growth and to align capital adequacy closer to the requirements of
Basel 2.
Cash flow
Cash generated by operations more than doubled to R2?381 million which included
R2 030 million from continuing operations. The improvement can mainly be
attributed to better working capital management. A further R1 340 million in
cash was received from the sale of Tourvest and the aviation division.
Net capital expenditure of R1 173 million was incurred compared to R1 773
million in the corresponding period. R509 million (2007: R1 303 million)
represented expansion capital expenditure. All divisions contributed to the
decrease in capital expenditure. The major part of the decline in expansion
capital expenditure occurred in the vehicle retailing operations where new
investment in dealership properties was curtailed and in the car rental division
where the strategy of slower replacement of vehicles for the Tempest fleet was
implemented.
The proceeds from the disposal of investments, including the disposal of
equities in the insurance portfolios and the disposal of shares in Eqstra
amounted to R315 million.
Dividends, repayment of long-term borrowings and hedging costs amounted to R915
million.
Vehicle sales
In southern Africa, the group retailed 29?005 new and 26?069 used vehicles,
respectively 65,5% and 81,4% of last year`s sales. The closure of several used
car dealerships contributed to the decline in used vehicle sales. The group
further sold 7 111 new vehicles to outside dealers as a distributor, a 26,6%
decrease over last year. The Australian, Swedish and United Kingdom operations
sold 6 295 new and 2 162 used vehicles, respectively 106,8% and 87,3% of last
year`s sales.
Expansion of the group during the year
The only sizeable acquisition during the period was the acquisition of Hansmann,
a logistics provider to Volkswagen in Wolfsburg in Germany. In the Southen
African Logistics division, Tip Trans, a transporter of bulk materials was
acquired, as well as the minority shareholdings in Liebentrans, Beekman Canopies
in the motor dealerships division and SA Warranties in the insurance division.
DIVISIONAL REPORTS
Logistics
Southern African Logistics
2008 2007 %
Revenue 5 308 4 618 14,9
Operating profit 418 368 13,6
Operating assets 6 572 6 791 (3,2)
Operating margin 7,9% 8,0%
The Southern African Logistics division performed well by limiting the decline
in its margins and strongly growing its revenue. The division`s high exposure to
the FMCG market stood it in good stead, as this segment has proven to be less
affected by the serious economic downturn which we currently experience. The
division has a well balanced portfolio of businesses which can benefit from
changing spending patterns towards more affordable products.
The division has a limited exposure to the transportation of mining produce and
containers, which declined sharply. However, our exposure to weaker import and
export volumes, steel, cement, industrial chemicals and residential building
materials, is larger and began to affect us in the latter part of the reporting
period. We expect weak conditions to continue for the foreseeable future.
Capital expenditure in the division was lower than last year and working capital
management has improved.
International Logistics
2008 2007 %
Revenue 4 686 3 898 20,2
Operating profit 204 187 9,1
Operating assets 4 138 3 055 35,4
Operating margin 4,4% 4,8%
These results compare to a seven-month trading period in the comparative period.
Trading conditions started well for our European operations but deteriorated
markedly during December, especially in the steel and automotive sectors, which
comprise a significant part of our customer base. Some auto plants were closed
for up to four weeks over December and January and an important steel producing
customer brought forward the scheduled maintenance on half of its plant to
reduce its output.
The new acquisitions in automotive pre-assembly and parts supply as well as
inland waterway shipping on the Danube performed well.
Whilst freight volumes in containers, dry bulk and manufactured materials such
as steel and paper are currently well down on last year, some new markets are
being entered. The difficult trading environment is also bringing new expansion
and acquisition opportunities as competitors are weakened.
Car Rental and Tourism
2008 2007 %
Revenue 1 337 1 362 (1,8)
Operating profit 163 186 (12,4)
Operating assets 2 224 2 232 (0,4)
Operating margin 12,2% 13,7%
The decline in profits is largely due to weaker demand and lower fleet
utilisation, especially in the foreign tourist market. Our relatively low
exposure to this market shielded the division from further weakness. The used
car market is also depressed due to an oversupply of used cars and a lack of
adequate bank funding. However, our extensive infrastructure to retail fleet
vehicles stood us in good stead in maintaining acceptable margins in the used
car business.
Rental rates held up to cover cost increases and accident and theft losses
reduced. The tourism operations of Springbok Atlas and the coach touring
businesses in Namibia grew profits despite an increase in bad debts.
Demand for car rental services is benefiting from the infrastructure building
process and preparation for the FIFA World Cup. Conferencing and upcoming sports
events, the Confederation Cup and Lions rugby tour will further support demand
for car rental and coach chartering operations.
Despite some positive factors in the second half of the year, we expect trading
conditions to remain tough and we expect little or no uplift in used car sales
and margins.
Distributorships
2008 2007 %
Revenue 7 061 7 754 (8,9)
Operating profit 182 427 (57,4)
Operating assets 6 869 6 925 (0,8)
Operating margin 2,6% 5,5%
The results of Associated Motor Holdings were severely affected by the state of
the motor market and the exchange rate. Wholesale unit sales were 26,6% down on
the corresponding period and retail units were 41,5% down. Decisive measures are
being taken to correct the cost base for current conditions which led to the
closure of 17 sales outlets and a reduction in staff by approximately 800
people. Administration departments were rationalised where possible. The bulk of
the related closure costs were incurred during the period.
Trading conditions in our joint venture with Renault were also difficult, and we
agreed to advance a secured shareholder loan of R75 million to Renault SA.
Sales in the Australian Ford dealerships have increased, but assisted by large
car rental orders at low margins. The Australian operation returned a profit,
but was boosted by a R25 million recovery of VAT which was previously expensed.
National Airways Corporation (NAC), the general aviation sales and service
operation traded well and improved its profit, assisted by improved efficiencies
and the weaker rand. Inventories and working capital were reduced.
The auto parts business housed in this division effected a turnaround from a
loss last year. However, further improvements in volumes and margins are
required to achieve ongoing acceptable returns.
The division will remain under pressure from the depressed motor vehicle market,
the weaker rand and a steep reduction in demand for privately owned aircraft.
Dealerships
2008 2007 %
Revenue 9 496 9 958 (4,6)
Operating profit 151 223 (32,3)
Operating assets 5 288 5 055 4,6
Operating margin 1,6% 2,2%
Maintaining the operating margin at 1,6% in current conditions was satisfactory.
The drop in profit can be ascribed to the cost base which cannot be reduced in
line with lower sales volumes. Parts, accessories and workshop operations
improved and grew their gross profits.
The focus remains on operational improvements and cost control, although
significant closure costs were incurred during the period. While nine
unprofitable outlets were closed, the dealer portfolio is constantly being
improved through rationalisation and modest expansion into areas which offer
better trading prospects.
The lower demand for vehicles was exacerbated later in the period by banks
reducing lending to the consumer market.
The performance of the commercial vehicle segment was good, where we expanded
capacity. Medium and heavy commercial vehicle sales held up well in the first
half of the period. However, sales also began to decline later in the period.
The DAF and LDV truck dealerships in the UK are under close scrutiny as that
economy is currently being hard hit by the credit crunch. DAF is the leading
commercial vehicle brand in Europe.
The Nissan dealerships in Sweden performed satisfactorily.
Insurance
2008 2007 %
Revenue 1 454 1 317 10,4
Operating profit 77 202 (61,9)
Operating assets 3 925 4 185 (6,2)
Operating margin 5,3% 15,3%
Negative fair value adjustments in the share portfolios of the division amounted
to R110 million (2007: R5 million) due to the weak performance of equity
markets.
Regent Insurance increased its underwriting result by 17,0% to R87 million,
following strong contributions from commercial and heavy commercial vehicles as
well as credit shortfall products. The result from passenger and light
commercial vehicle comprehensive insurance was disappointing.
The Regent Life group incurred an underwriting loss of R27 million, which
included an underwriting profit of R26 million from its Botswana unit. We do not
believe the results from Botswana to be sustainable at its current exceptionally
strong level. The poor performance by the life assurance segment was caused by
several factors, including new business strain in the build-up of the monthly
premium book following the introduction of the National Credit Act (NCA), which
terminated the writing of single premium business. The comparative period
benefited from a higher release of profit from the single premium book than the
current period. New business strain is also being experienced in the individual
life book. The combined effect of these factors amounted to approximately R50
million. Credit life policy surrenders continued to be high, although lower than
the previous period.
At our previous reporting date we indicated that the recovery of our insurance
division will take some time. We are satisfied with the progress made subsequent
to the restructuring of this business and after the merger of the two entities.
Restructuring costs were incurred during the period, but we expect long term
savings to be achieved.
In order to reduce the volatility in the insurance division`s results, we
decided early in the financial year to commence reducing the exposure to
equities in a gradual process.
Skills development and corporate social investment
Imperial Holdings has made a significant commitment to the development of our
staff as we believe it will ensure sustainable high levels of performance by our
group and advance previously disadvantaged employees. Technical training and
leadership initiatives in the group progressed further during the period and the
second motor apprentice technical training facility of the group is due for
completion in Germiston in May this year at a cost of R24 million. This facility
will provide apprentice training for petrol, diesel as well as motorbike
mechanics. It will also act as an accredited trade test centre for the industry
at large. Despite the downturn in the motor industry a shortage of fully trained
technicians still exists in our industries and these initiatives will make a
meaningful contribution in this field. We have also introduced a comprehensive
management development programme for the automotive retail businesses of the
group with a high participation level from black middle management. The
programme will equip managers to meet the challenges in the motor industry. Our
educational programmes are aligned to MERSETA requirements in order to gain
maximum recognition through the National Qualifications Framework (NQF).
Driver training, health and road safety is of paramount importance to our group
because we are significant users of our roads. Through our associate company
Ikaheng, we train approximately 370 drivers per annum. We project manage and
sponsor a large number of roadside wellness centres and mobile clinics
throughout southern Africa.
The Imperial Ukhamba Community Development Trust is the group`s flagship
community development initiative focusing on primary education in poor areas. It
supports three schools in under-privileged parts of Gauteng and has spent over
R11 million at these schools. The projects have achieved significant progress in
terms of numeracy and supports 3?300 learners in terms of curriculum
development, textbooks, teacher training and the construction of much needed
infrastructure.
Dividend
An ordinary dividend of 80 cents per share has been declared at the interim
stage. The amount of the final dividend will be considered at the time with due
regard to all the prevailing circumstances.
Strategic intentions
Following the restructuring concluded last year, the re-balancing of our
portfolio and optimal capital allocation are currently receiving attention. The
disposals of Tourvest and aviation and the unbundling of Eqstra have rendered
the group stronger but more cyclical than before. It also raised the prominence
of the motor vehicle retailing component, which increased the potential
volatility in earnings and our exposure to economic cycles which are outside of
the board`s control.
The board approved a strategy to limit the group`s relative exposure to the
motor retailing industry. Whilst no divestitures from the motor portfolio are
planned, further investments in the logistics industry and selected areas in the
tourism industry will be favoured.
The board will also assess the capital adequacy of the group throughout this
turbulent period while balancing shareholder remuneration, growth and financial
prudence. We have no capital market redemption obligations before August 2010
and we have substantial long term undrawn liquidity facilities available. Under
the current unpredictable economic conditions, the board regards the importance
of the group`s ongoing financial strength and liquidity as paramount.
Prospects
The depth and duration of the global economic crisis is uncertain. The impact of
the crisis is currently more pronounced in the USA, the UK and continental
Europe than in South Africa, but a further decline in the positive growth in the
South African economy is likely. Under such circumstances, the difficult trading
that we are currently experiencing in the majority of our divisions will
certainly continue until confidence in economic prospects return. The recent 150
basis point reductions in the prime lending rate will relieve pressure on the
financial health of consumers, as will the reduction in the fuel price. However,
we do not believe that a recovery in new vehicle sales will occur in the near
future.
Extremely weak conditions are being experienced in Europe and will continue for
the remainder of the year. Although more resilient due to its FMCG exposure, our
Southern African Logistics business is also expected to experience a softening
in many of its markets. Industrial action is expected in the transport sector,
which could have a negative effect on earnings in the division.
We expect that the underwriting results of our short term insurance unit will
remain healthy, while a return to acceptable underwriting results in the life
company will take more time.
Whilst elements of the car rental and tourism division are exposed to weak
sectors such as local and foreign tourist volumes, as well as the weakening
domestic economy, we expect that events such as the Confederations Cup, the
Lions rugby tour and the 2010 FIFA World Cup would support the division`s
performance.
When normality returns to global financial markets and the real economy,
Imperial will be well positioned to take early advantage of an upswing, as our
cost base has been well trimmed without the loss of operating capacity.
In view of the aforesaid, we believe that the second half of our financial year
will be more difficult than the first half.
Forward looking statements
To the extent that any information provided may be of a forward looking nature,
such information has not been reviewed or reported on by the auditors in terms
of either paragraph 3.4 (b)(vi)(1)(aa) or paragraph 3.4 (b)(vi)(1)(bb) of the
Listings Requirements.
By order of the board
T Gcabashe, Chairman
H Brody, Chief Executive
AH Mahomed, Financial Director
Declaration of distributions
Preference shareholders and ordinary shareholders
Notice is hereby given that:
- a preference dividend of R5,8171 per preference share has been
declared payable to holders of non-redeemable, non-participating
preference shares; and
- an ordinary dividend in an amount of 80 cents per ordinary share has
been declared payable to ordinary shareholders.
The company has determined the following salient dates for the payment of the
preference dividend and ordinary dividend:
2009
Last day for preference shares and ordinary shares
respectively to trade cum preference dividend and
cum ordinary dividend respectively Friday, 20 March
Preference and ordinary shares commence trading
ex preference dividend and ex ordinary dividend respectively Monday, 23 March
Record date Friday, 27 March
Payment date Monday, 30 March
Share certificates may not be dematerialised/rematerialised between Monday, 23
March 2009 and Friday, 27 March 2009, both days inclusive.
On Monday, 30 March 2009, 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 30 March 2009 will be posted on or about that date.
Shareholders who have dematerialised their shares will have their accounts, held
at their CSDP or broker, credited on Monday, 30 March 2009.
In terms of the Exchange Control Regulations of the Republic of South Africa,
cash payments based on emigrants` shares controlled in terms of the Exchange
Control Regulations will be forwarded to an authorised dealer in foreign
exchange controlling their blocked assets. The elections by emigrants for the
above purpose must be made through the authorised dealer in foreign exchange
controlling their blocked assets. Payments due to non-residents are freely
transferable from the Republic.
Preferred ordinary shareholders (unlisted)
Notice is hereby further given that a dividend 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, 26 March 2009.
On Friday, 27 March 2009 the dividend will be electronically transferred to the
bank accounts of preferred ordinary shareholders.
On behalf of the board
RA Venter
Group Company Secretary
25 February 2009
For segmental information please go to our website at www. Imperial.co.za
Non-executive directors
TS Gcabashe (Chairman), S Engelbrecht, P Langeni, MJ Leeming,
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 (Proprietary) Limited, 70 Marshall Street,
Johannesburg, 2001
Sponsor
Merrill Lynch SA (Pty) Limited, 138 West Street, Sandown, Sandton, 2196
Date: 25/02/2009 07:05:05 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 the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
