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IPL
IPL/ IPLP - Imperial Holdings Limited - Audited preliminary results for the
year ended 30 June 2010
Imperial Holdings Limited
Registration number: 1946/021048/06
Ordinary share code: IPL ISIN: ZAE000067211
Preference share code: IPLP ISIN: ZAE000088076
IMPERIAL HOLDINGS LIMITED
AUDITED PRELIMINARY RESULTS for the year ended 30 June 2010
HIGHLIGHTS
HEPS from continuing operations 40% higher at 976 cents
Revenue 2% higher at R53,4 billion
Operating profit 34% higher at R3,3 billion
A strong balance sheet with gross debt reducing from R10,2 billion to R8,3
billion
- A final dividend of 200 cents
Full year dividend of 350 cents (75% higher)
Overview of results
All of the divisions in Imperial delivered outstanding results notwithstanding
the tough economic conditions which still prevail in many of our markets.
During the year management concentrated on operational efficiencies, superb
marketing and, in general, doing the basics right. There are currently no
significant underperforming businesses in the group. Our cost base,
particularly in our motor divisions where the market contracted considerably,
was cut early during the financial downturn to the appropriate levels for the
current size of the respective markets. Acquisitions during the year were
earnings enhancing.
Headline earnings per share (HEPS) from continuing operations increased by 40%,
having been 17% up at the interim stage. HEPS in the previous year included a
foreign exchange gain of R394 million (212 cents per share) which was earned on
the repatriation of capital from our European operations.
Revenue from continuing operations was 2% higher at R53,4 billion. Fifty nine
percent of revenue was generated by our Automotive Retail and Distributorships
divisions which derive the bulk of their revenue from the retailing of
passenger and commercial vehicles and 31% was generated by the Southern African
and European logistics operations. Car Rental and Tourism and Insurance
generated the remaining 10% of revenue. This revenue split indicates an
increase of 3% in the contributions of the combined motor retailing businesses.
Operating profit was 34% higher, a substantial increase in a market which has
not yet recovered from the recession. Whilst all the divisions increased their
operating profit, the main contributors to this increase were the
Distributorships (+126%) and Insurance (+57%) divisions. Automotive Retail and
Distributorships represent 44% of operating profit whilst the Logistics and the
Car Rental and Tourism divisions, which have less volatile profit streams
represent a similar proportion. Notwithstanding a very turbulent global
industrial and trading environment over the past two years, the logistics
divisions` profits did not contract and proved to be very robust.
The contribution of certain non-trading items included in headline earnings
made a relatively small contribution to HEPS. These are a fair value gain on
the Lereko BEE financial instrument of R78 million (42 cps), a benefit of R69
million (37 cps) on the reversal of a share trust loan impairment and related
tax benefit , and a R27 million (15 cps) gain on the repurchase of Euro bonds.
When set off against the inclusion in headline earnings of R120 million (65
cps) of Capital Gains Tax on the sale of Imperial Bank , the net gain of the
aforesaid items amounts to only 3,5% of continuing HEPS.
The group`s operating margin of 6,2% improved substantially from 4,7% in 2009
and 5,2% in 2008, before the onset of the global economic crisis and recession.
All divisions improved their margins, the most significant being the
Distributorships division which improved from 3,7% to 6,4% on a substantial
revenue increase of 33%. The group`s margin improvement can be credited to a
revival in certain of our markets and good cost management across the group.
Net finance cost reduced by 35% to R597 million. Gross interest bearing debt
declined by almost R2 billion due to good working capital management, cash
receipts from the sale of Imperial Bank and the effect of the stronger Rand on
our foreign debt balances. The charge was further reduced by lower Rand
interest rates on our floating rate debt, which constitutes approximately 40%
of gross debt, fair value gains compared to prior year losses on interest rate
swaps as well as interest savings on Eurobond repurchases.
Income from associates increased by 63% to R174 million. The contribution of
R175 million from our 49,9% interest in Imperial Bank until its disposal in
early February 2010 was up from R126 million earned last year. Our newly
acquired 25% interest in Mix Telematics added R5,6 million, and the
contribution from some smaller associates declined.
Tax
The effective tax rate was 31% compared to the statutory tax rate of 28%. The
higher tax rate is attributable to the CGT payable on the sale of our 49,9%
shareholding in Imperial Bank and STC on dividends paid and on share buy-backs
to hedge share appreciation rights obligations. This was partially offset by
the benefit from the share scheme provision reversal and prior year over-
provisions.
Cash flow
Cash generated by operations (after net capital expenditure on rental assets)
is down by 27%, mainly as a result of the delayed de-fleeting in the car rental
fleet because of the FIFA World Cup and the cash released through the reduction
in net working capital being much lower than in the prior year. The major
improvement in working capital in the prior year, when our businesses
contracted, could not be repeated, considering the growth experienced in most
of the underlying operations in the current year.
Net capital expenditure was stable at R1,9 billion as was the investment in
property, plant and equipment and transport assets. Vehicles for hire was
approximately R600 million higher due to the delayed de-fleeting of rental
vehicles to meet the demand for the FIFA World Cup and because of vehicles
being supplied to outside car rental companies by AMH.
The cash proceeds from the sale of Imperial Bank Limited was R1,4 billion.
The decrease in cash was also impacted by the share buy-back of R200 million
and the movement of approximately R750 million cash to a longer dated maturity
profile in the investment portfolio of Regent , resulting in a reallocation
from cash to investments on the balance sheet.
Long term debt of R697 million was repaid during the period.
Balance sheet
Cash preservation during the year was good, as net working capital was
unchanged at only R1,9 billion with good improvement in the Automotive Retail
division whilst working capital of Distributorships increased due to the
acquisition of Midas and generally much higher activity. The proceeds from the
sale of Imperial Bank will amount to R1,9 billion of which R477 million is
still due for payment in August. Approximately R750 million has been spent on
acquisitions as detailed below. Net debt was reduced by approximately R500
million.
Net debt (excluding preference shares) to equity is at 39% compared to 50% a
year ago and 50% at December 2009, which is below our target range of 60% to
80%. Two bonds totalling R2 billion mature during August and November 2010 and
adequate facilities are available for these redemptions. We will continue to
raise long term debt when appropriate in order to maintain good liquidity to
ensure a smooth debt redemption profile that matches our asset base.
Vehicle sales
In South Africa, the group retailed 73 326 new and 52 576 used vehicles,
respectively 38% and 10% more than last year. The national vehicle market grew
by 2% during the corresponding period. The strong increase in Imperial`s sales
largely occurred in the sale of fully built up imported models by AMH, which
was assisted by the variety of new models launched during the period, the
attraction of its model range and the stable currency. The exceptional exposure
which Hyundai and Kia enjoyed through their sponsorship of the FIFA World Cup
also contributed.
The Australian, Swedish and United Kingdom operations sold 8 608 new and 3 929
used vehicles, declines from last year of 20% and 12% respectively, partly due
to the sale of the Swedish operation in the first quarter of the financial
year.
Discontinued operations
The winding down of Commercial Vehicle Holdings is virtually complete. Vendor
loans to the acquirer of our aviation assets are paid up to date in accordance
with the various contractual obligations.
Acquisitions
The group spent approximately R750 million on acquisitions during the year, the
most significant of which were 75% of Midas, 25% in MiX Telematics, 65% of the
Goscor group and 55% in Provaart. Midas markets and distributes quality
automotive, DIY and leisure products through owned and franchised outlets under
the brands Midas, Motolek, ADCO, CBS and Auto Care & Diagnostics. MiX
Telematics, listed on the JSE, is focused on all levels of vehicle tracking
through the Matrix brand, and commercial vehicle performance and driver
monitoring with a complete range of fleet management products and services. It
has substantial annuity revenue from approximately 200 000 subscribers, with
operations in South Africa, the United Kingdom, the USA , UAE , and Australia
and a global distribution network covering over 100 countries. Goscor is the
sole distributor of Crown, Doosan and Bendi forklift trucks, Tennant cleaning
equipment, arc welding and cutting systems, as well as generators,
construction, cleaning and other well known branded industrial equipment.
Provaart is a chartering business in Rotterdam operating on the Rhine River.
Lereko
Third party debt in respect of the Lereko BEE transaction amounting to R856
million is due for settlement on 1 October 2010. 14 516 617 preferred ordinary
shares in Imperial and Eqstra , held by Lereko Mobility, in which Imperial
holds a share of 49%, will convert to ordinary Imperial and Eqstra shares on 30
September 2010. Lereko Mobility has sold 8 million Imperial and 8 million
Eqstra ordinary shares by way of forward sales, and a further small quantity of
Imperial and Eqstra shares will still be sold to raise the required funds to
settle the third party debt when it falls due. Lereko Mobility will then hold
approximately 6 million Imperial and 6 million Eqstra shares. The agreement
regarding the vendor finance of R598 million which was provided in 2005 will
continue until 2015, or one year earlier, at the discretion of Imperial and
Eqstra. On settlement of the third party funding, the fair value of the vendor
loan will no longer be adjusted through the statement of comprehensive income
and the remaining shares will be treated as treasury shares. Although the group
will have approximately 8,5 million additional ordinary shares in issue, the
saving of the preferred dividend will result in earnings being neutral.
Business conditions in our markets
Industry conditions for the Southern African logistics business, with its high
exposure to the distribution of fast moving consumer goods, improved in some
areas during the second half of the financial year. Volumes in the industry are
still lower than in late 2008, but up on a year on year basis from the fourth
quarter of our 2009 financial year. Conditions in Europe have recovered
significantly from their lows in 2009. Freight rates in Europe are still under
pressure, but volumes have nearly recovered to their pre-recession levels.
German manufacturing is benefiting from the weak Euro, with attendant benefits
to the inland waterway shipping and port operations of Imperial Logistics
International.
Car rental and tourism demand was high during the month of the FIFA World Cup.
However, prior to that, local business travel and incoming tourist demand was
still depressed. Used car demand also strengthened during the year.
The automotive replacement parts market where we are mainly represented by
Midas and Alert Engine Parts proved very resilient during the downturn and
benefited through consumers keeping vehicles for longer.
The vehicle market started improving in the second half of our financial year
from very depressed levels during 2008 and 2009. Car rental demand prior to the
FIFA World Cup contributed to vehicle sales, but demand from ordinary consumers
has also been strong.
The recovery in equity markets during the financial year had a significant
effect on profitability of our Insurance division when compared to lower
returns on the equity portfolio in the prior year. However, underwriting
conditions in the passenger car market are still tough.
Divisional reports
Logistics
Southern African Logistics
Change % Change %
R million F2010 F2009 YoY on H2 2009
Revenue 10 308 9 831 4,9 14,8
Operating profit 763 738 3,4 21,1
Operating margin (%) 7,4 7,5
Change %
R million H2 2010 H2 2009 H1 2010 H1 2010
Revenue 5 194 4 523 5 114 1,6
Operating profit 396 327 367 7,9
Operating margin (%) 7,6 7,2 7,2
Due to its exposure to diverse industries, the division succeeded in limiting
the negative impact of the economic recession by growing revenue by 4,9% and
operating profit by 3,4%. Operating profit from African operations was 33% up
as we continue growing our footprint in the continent.
Results were significantly up on the second half of the prior financial year,
which bore the brunt of the recession as well as a costly strike during April
2009. In spite of traditional seasonality which favours the first half, the
division managed to post 7,9% higher operating profit in the second half.
The recovery that was evident in the first half of this financial year
continued as volumes increased on the back of higher economic activity. Our
Transport and Warehousing business, which mainly services the manufacturing,
mining, commodities and construction industries performed well with a marked
improvement in revenue and operating profit. New contract gains also
contributed to the positive performance.
The Specialised Freight business produced good results and achieved good
efficiencies despite tough trading conditions, which were impacted by erratic
volumes in cement and industrial chemicals production. Volumes grew in the bulk
food and chemicals businesses and additional volumes were gained in the liquid,
petroleum and gas markets, due to the rationalisation in this industry.
The Consumer Logistics business was adversely affected by the slowdown in
consumer demand with some improvement in volume from February this year. This
business cut costs and rationalised its fleets according to current demand
levels, which protected operating margins to some extent. The performance was
enhanced by the addition of significant blue chip contract wins.
The new sub-division, Integration Services was established and is well
positioned to extend its service offering to customers and other business units
within this division.
Gross capital expenditure of R811 million was incurred. The net investment in
the fleet is marginally lower than a year ago. The division has disposed of its
27,9% effective interest in Fuelogic (Pty) Limited during the period.
International Logistics
Change % Change %
R million F2010 F2009 YoY on H2 2009
Revenue 6 378 8 046 (20,7) (7,0)
Operating profit 298 320 (6,9) 41,5
Operating margin (%) 4,7 4,0
Change %
R million H2 2010 H2 2009 H1 2010 H1 2010
Revenue 3 126 3 360 3 252 (3,9)
Operating profit 167 118 131 27,5
Operating margin (%) 5,3 3,5 4,0
Change % Change %
EUR million F2010 F2009 YoY on H2 2009
Revenue 604 651 (7,2) 14,3
Operating profit 30 25 20,0 125,0
Operating margin (%) 5,0 3,8
Change %
EUR million H2 2010 H2 2009 H1 2010 H1 2010
Revenue 312 273 292 6,8
Operating profit 18 8 12 50,0
Operating margin (%) 5,8 2,9 4,1
Despite the recession, Imperial Logistics International achieved an outstanding
result in its 2010 financial year, especially in the second half, which shows
evidence of the strength of the recovery in industrial activity in our European
target markets. The 2010 results in Euro terms are better than reflected in the
ZAR table due to the stronger Rand, with revenue down only 7,2% and operating
profit up 20% for the period.
Revenue growth was negatively impacted by lower freight rates but volumes were
higher than last year, especially in the second half. A new contract gained by
Gillhuber for the external warehousing and interplant transport for a motor
manufacturer in Germany helped to offset the decline in revenue.
The division was quick to react during 2009 to the advent of the global
economic slump with cost savings and restructuring of supplier arrangements.
The full impact of this was experienced in the second half of this financial
year, evidenced by the healthy increase in the operating margin over the
preceding half year.
Significant cost reductions and the re-commissioning of the steel furnace of a
major customer contributed to a good performance by the inland waterway
shipping business.
Panopa, which provides parts distribution services and in-plant logistics
services to automotive manufacturers was the worst affected by the economic
crisis. It experienced a decline in volumes and the loss of a contract during
the period also had a negative impact. Notwithstanding this, Panopa is
profitable and generates an acceptable return on invested capital.
Despite tough economic conditions, the port operator, Neska performed well and
maintained its profits, mainly due to increased activity in the container
business and steady bulk ore volumes. A number of new container terminals are
now in full operation and a highly integrated multi-modal service (waterway,
road and rail) is being provided to the German industry utilising our network
of terminals as central hubs.
Capital expenditure for the period was lower due to the uncertainty of the
duration of the economic downturn. This trend should reverse in the new
financial year as economic conditions begin stabilising. One small acquisition,
namely Provaart was finalised during the year.
Car Rental and Tourism
Change % Change %
R million F2010 F2009 YoY on H2 2009
Revenue 2 941 2 618 12,3 16,9
Operating profit 395 336 17,6 30,6
Operating margin (%) 13,4 12,8
Change %
R million H2 2010 H2 2009 H1 2010 H1 2010
Revenue 1 497 1 281 1 444 3,7
Operating profit 226 173 169 33,7
Operating margin (%) 15,1 13,5 11,7
The division achieved excellent year-on-year growth in revenue and operating
profit. Strong growth was experienced in the car rental business with revenue
days increasing by 9%. Rental volumes were impacted positively by the FIFA
World Cup. Significant growth in the international, leisure and vehicle
replacement businesses compensated for the flat corporate volumes and the
decline in government volumes. The re-branding of the car rental business to
Europcar, associated marketing spend and facilities upgrades brought numerous
benefits and efficiencies in the business. U-Drive also contributed for the
full year compared to eight months in the prior year.
The average rental fleet size was 4% up from last year, utilisation improved by
3% but revenue per day was 1% below last year due to a change in the business
mix to a larger proportion of replacement business. Replacement car rentals are
for longer periods and are therefore beneficial notwithstanding lower daily
rates.
The used vehicle market was more buoyant and showed a strong improvement late
in the period. Retail unit sales were up and margins improved due to the
improved demand for late model used cars.
The global recession impacted negatively on all our touring and transport
businesses and normal trading remains under pressure. However, revenue was
significantly boosted by a major convention that took place during December
2009 and the FIFA World Cup soccer tournament.
Springbok Atlas was the sole transporter of the 32 participating teams for the
duration of the tournament. Having been responsible for the movement of sports
teams during all key recent events the company has established itself as the
premier sports transport logistics provider in South Africa.
Distributorships
Change % Change %
R million F2010 F2009 YoY on H2 2009
Revenue 17 372 13 112 32,5 60,9
Operating profit 1 110 491 126,1 136,2
Operating margin (%) 6,4 3,7
Change %
R million H2 2010 H2 2009 H1 2010 H1 2010
Revenue 9 739 6 051 7 633 27,6
Operating profit 730 309 380 92,1
Operating margin (%) 7,5 5,1 5,0
Excluding our Australian operation, new vehicle registrations as reported to
NAAMSA by AMH and Amalgamated Automobile Distributors (AAD) are 54% up compared
to a market increase of 2%. The successful launch of new models and the
improvement in the new vehicle market in the past six months all contributed to
the exceptional growth in revenue and operating profit. Sales reflect a change
in model mix trend towards entry level vehicles and notably Kia Picanto,
Hyundai Atos and Hyundai i10 are filling a gap in the market place. Significant
gains were made into car rental companies due to these models. The prominent
sponsorship by Hyundai and Kia of the FIFA World Cup further boosted growth and
helped entrench these brands as major competitors in the South African market.
The improved margin is as a result of the substantial increase in sales
volumes, effective cost control and a stable Rand.
During the period AMH ceased the distribution of Citroen in Southern Africa and
acquired a majority shareholding in the Goscor Group, whose primary businesses
involve importation, distribution and rental of cleaning equipment, forklifts,
power products and specialised arc welding and tooling. Industrial equipment
and parts is an area that the group will develop further as we can capitalise
on our skills in importation, distribution and warehousing.
Liquid Capital, the division`s financial services arm continues to grow as we
gain market share. Liquid Capital is an important service provider in the
industry in terms of service and maintenance plans, CSI and customer call
centres including roadside assistance.
In the Auto Parts division, which specialises in the supply of aftermarket
spare parts and accessories, the Midas acquisition became effective from 1
December 2009 and contributed for seven months. The business is performing
ahead of expectations and has made a meaningful contribution to divisional
profits. Alert Engine Parts performed well. Imperial is now the leader in this
very substantial market segment and our scale will facilitate further
efficiencies and creates a base to enter adjacent parts and component markets.
Earnings from the general aviation business, NAC, declined as aircraft sales
came under pressure, both from lower demand and a lack of availability of bank
funding for this asset class. This was partly offset by the boost in revenues
from the charter division during the FIFA World Cup.
Retail unit sales in the Australian dealerships were down but the business made
a modest profit after interest. Renault is performing well and has experienced
a marked improvement in sales volumes as a result of new product launches.
The division has further reduced its interest by disposing 24% of NGK Spark
Plugs during the period.
Automotive Retail
Change % Change %
R million F2010 F2009 YoY on H2 2009
Revenue 15 543 16 691 (6,9) 8,8
Operating profit 351 279 25,8 42,2
Operating margin (%) 2,3 1,7
Change %
R million H2 2010 H2 2009 H1 2010 H1 2010
Revenue 7 829 7 195 7 714 1,5
Operating profit 182 128 169 7,7
Operating margin (%) 2,3 1,8 2,2
The Automotive Retail division`s results have improved significantly over the
prior year. This is despite new commercial vehicle sales volumes being down on
last year and passenger volumes being in line with market growth of 2%. The
revenue decline was also exacerbated by dealership closures and a weak
commercial vehicle market. Volumes in the second half were significantly up on
the immediately preceding half year. Following strict cost management and the
closure of unprofitable dealerships, the operating margin for the full year
improved to 2,3% from 1,7% and to 2,3% from 2,2% for the second half over the
first half. Margins also benefited from the robust used vehicle market and
continued focus in the after sales businesses.
Current trends indicate that passenger and light commercial vehicle volumes
have improved markedly. The total market has improved by 23,9% for the six
months to June 2010 with passenger cars 27,9% up. The commercial vehicle market
has also flattened out due to stronger extra-heavy commercial sales being
offset by medium and heavy commercial sales that have continued to decline.
Although new vehicle stock shortages have been resolved and dealerships are
returning to normal inventory levels, the situation will be negatively affected
by recent industrial action in the sector. The pricing gap between a good
quality used car and a new car has continued to close. This should favour new
car sales in the future.
Further rationalisation in the UK truck dealerships and cost reductions
resulted in a modest improvement in profitability in a market which remained
extremely depressed. The four Nissan dealerships in Sweden were sold in the
first quarter of the year.
Beekman Canopies` sales have improved on last year despite a reduction in the
light commercial vehicle market, due to their marketing initiatives. Sales
volumes in Jurgens Caravans also improved. Beekman and Jurgens are capitalising
on manufacturing synergies and a strategy to improve volumes by harnessing
group-wide opportunities is being implemented and should assist in further
improving the divisional profitability.
Regent group
Change % Change %
R million F2010 F2009 YoY on H2 2009
Revenue 2 694 2 847 (5,4) (3,4)
Adjusted investment income,
including fair value
adjustments 275 116 137,1 (14,1)
Adjusted underwriting result 218 199 9,5 10,9
Operating profit 493 315 56,5 (2,5)
Net underwriting margin (%) 8,1 7,0
Change %
R million H2 2010 H2 2009 H1 2010 H1 2010
Revenue 1 345 1 393 1 349 (0,3)
Adjusted investment income,
including fair value
adjustments 110 128 165 (33,3)
Adjusted underwriting result 122 110 96 27,1
Operating profit 232 238 261 (11,1)
Net underwriting margin (%) 9,1 7,9 7,1
Note: Investment income and underwriting income have been adjusted by the
reallocation to underwriting income of policy holder benefits attributable to
investment linked policies in the amount of R42 million (2009: R24 million).
The improvement in operating profit is derived from a pleasing underwriting
result and the increase in investment income from R116 million to R275 million.
The increase in investment income was mainly as a result of an improvement in
equity markets compared to the prior year. Equities currently represent
approximately 20% of the investment portfolio. The equity proportion of the
portfolio should increase modestly over the next year within a conservative
investment framework.
Gross written premium was 5,4% lower, due to the loss of a key account in
Botswana and generally lower economic activity levels having an impact on
policy sales in the commercial vehicle and motor comprehensive operation in the
SA short term business. The adjusted underwriting result was 9,5% higher at
R218 million. This resulted from good growth and improved profitability in the
Individual Life businesses. This made a meaningful contribution to results,
particularly in the second half as reflected in the improved net underwriting
margin. This result was adversely impacted by the reduced benefit of the run
off in the remaining single premium book, which is declining in line with
expectations and will come to an end in the 2012 financial year.
Whilst short term insurance underwriting conditions are expected to remain
tough, we anticipate positive growth in gross written premiums based on
improved conditions in the motor market.
Regent continues to improve its distribution and build a monthly premium book,
thereby positioning the business for future growth.
During the period we disposed of our 35% interest in Flagstone Re Africa for a
consideration of R84 million.
Dividends
A final ordinary dividend of 200 cents per share has been declared, which
brings the total ordinary dividend for the year to 350 cents per share
(2009:200 cents per share), an increase of 75% on the prior year.
People development and training
The Group`s philosophy is that training and development of our staff, with an
emphasis on the identification and advancement of black talent, is fundamental
to ensure sustainability and relevance across our industries in the long term.
Approximately R70 million (2009: R48 million) was spent during the year on
skills development and upliftment programmes which focused on people
development initiatives covering the whole spectrum of graduate programmes,
technical training, supervisory courses, middle management programmes and
executive education. We partnered with accredited institutions and aligned
ourselves with appropriate SETA requirements to gain recognition.
Corporate social investment
The Imperial and Ukhamba Community Development Trust supports seven schools in
unprivileged parts of Gauteng and has spent R20 million at these schools since
inception. The projects have achieved significant progress in the areas of
numeracy, curriculum development, literacy, teacher training, sports and
facilities. The Trust supports 7 500 learners at these seven schools on an
ongoing basis. In addition various other projects are undertaken by the
divisions.
Prospects
The recovery in the local economy remains sluggish, which will dampen the pace
of recovery in our Southern African logistics unit. However, further
efficiencies, new contract gains and recent acquisitions are expected to
augment market growth in general logistics activities and will lead to a
further improvement in the performance of this division. The planned
acquisition of CIC Holdings Limited which is currently under way will
accelerate our growth into the African continent. In Europe, prospects are good
for the continuation of the recovery in our business, as industrial activity in
our target markets is showing strong signs of improvement.
The significant investment in facilities and the improved efficiencies in
Europcar and Tempest should continue to bear fruit in the year ahead; however,
our growth will be tempered due to the higher base set by the FIFA World Cup in
the past financial year. The follow through in tourist volumes after this event
is still uncertain, but we are optimistic that the country`s elevated status as
a sought after and safe tourist destination will bring long term benefits to
our tourism businesses.
Due to their exceptionally strong network and product range, we expect a good
performance from our combined motor retailing businesses in the year ahead. The
new and used vehicle markets commenced a strong recovery from a very low base
in the first half of the 2010 calendar year. We expect the rate of growth in
new vehicle sales to reduce as the base increases, car rental demand reduces
and the new emissions tax on new vehicles places further pressure on the
affordability of vehicles. The used vehicle market is expected to be strong.
The replacement vehicle parts business will make a good contribution to profits
in the year ahead because Midas will be accounted for a full year and due to
the benefits flowing from an ageing car park.
The Regent group has undergone significant rationalisation and is focusing on
process improvements and distribution channel development. The run-off of the
pre-National Credit Act single premium book is nearing completion and scale is
now being achieved in monthly premium business and new niche products. The
investment portfolio will continue to be prudently managed.
Our balance sheet is currently stronger than at any time in the past decade.
This presents opportunities for acquisitive growth, which would be sought in
areas where our existing skills and infrastructure would give us an advantage.
The 2010 financial year delivered outstanding organic growth. The building
blocks of our business are soundly positioned for further growth, but the
economic recovery is still tentative. Uncertain economic trends prevail,
including increased workplace instability, high levels of unemployment in
Southern Africa, the impact of a strong currency on exports and high personal
debt levels.
By order of the board
TS Gcabashe, Chairman
HR Brody, Chief Executive
AH Mahomed, Financial Director
Declaration of dividends
Preference shareholders and Ordinary shareholders Notice is hereby given that:
a preference dividend of 383,2192 cents per preference share has been declared
payable to holders of non-redeemable, non-participating preference shares; and
a final ordinary dividend in an amount of 200 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:
2010
Last day for preference shares and ordinary Thursday, 16 September
shares respectively to trade cum preference
dividend and cum ordinary dividend
Preference and ordinary shares commence trading Friday, 17 September
ex preference dividend and ex ordinary
dividend, respectively, on
Record date Thursday, 23 September
Payment date Monday, 27 September
Share certificates may not be dematerialised/rematerialised between Friday, 17
September 2010 and Thursday, 23 September 2010, both days inclusive.
On Monday, 27 September 2010, 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 27 September 2010 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, 27 September 2010.
Preferred ordinary shareholders (Unlisted)
Notice is hereby further given that a preferred ordinary 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 Wednesday, 22 September 2010.
On Thursday, 23 September 2010 the preferred ordinary dividend will be
electronically transferred to the bank accounts of preferred ordinary
shareholders.
On behalf of the board
RA Venter
Group Company Secretary
25 August 2010
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Restated
Audited Audited
2010 2009 %
for the year ended 30 June Rm Rm Change
CONTINUING OPERATIONS
Revenue 53 438 52 219 2
Net operating expenses (48 771) (48 454)
Profit from operations before depreciation
and recoupments 4 667 3 765
Depreciation, amortisation and recoupments (1 379) (1 312)
Operating profit 3 288 2 453 34
Recoupments from sale of properties,
net of impairments 51 75
Foreign exchange gains 49 400
Fair value losses on foreign exchange
derivatives (38) (8)
Impairment reversals of share scheme loans 24
Gain on early settlement of European bond 27
Fair value gain on Lereko call option 78
Exceptional items 58 (431)
Profit before net financing costs 3 537 2 489 42
Net finance cost including fair value
gains and losses (597) (923)
Income from associates and joint ventures 174 107
Profit before taxation 3 114 1 673 86
Income tax expense (911) (502)
Profit from continuing operations 2 203 1 171
DISCONTINUED OPERATIONS 59 508
- Trading profit from operations 29 24
- Fair value profit on discontinuation 30 484
Net profit for the year 2 262 1 679
Other comprehensive income
Exchange losses arising on translation
of foreign operations (184) (566)
Cash flow hedges 22 (163)
Fair value gains on available for sale
financial assets 15 150
Share of other comprehensive income
of associates and joint ventures (37) (9)
Fair value gain (loss) on Lereko call option 244 (6)
Income tax relating to components of
other comprehensive income 1 (20)
Total comprehensive income for the year 2 323 1 065
Net profit attributable to:
Equity holders of Imperial Holdings Limited 2 021 1 518
Non-controlling interest
- continuing operations 241 160
Non-controlling interest
- discontinued operations 1
2 262 1 679
Total comprehensive income
attributable to:
Equity holders of Imperial Holdings Limited 2 085 940
Non-controlling interest
- continuing operations 238 124
Non-controlling interest
- discontinued operations 1
2 323 1 065
Audited Audited %
EARNINGS PER SHARE INFORMATION 2010 2009 Change
Earnings per share (cents)
- Basic
Total 1 047 776 35
Continuing operations 1 015 503 102
Discontinued operations 32 273
- Diluted
Total 991 730 36
Continuing operations 962 486 98
Discontinued operations 29 244
Headline earnings per share (cents)
- Basic
Total 992 715 39
Continuing operations 976 698 40
Discontinued operations 16 17
- Diluted
Total 941 675 39
Continuing operations 926 660 40
Discontinued operations 15 15
Headline earnings reconciliation -
continuing and discontinued operations (Rm)
Attributable profit 2 021 1 518
Attributable to preferred ordinary
shareholders (78) (78)
Attributable to ordinary shareholders 1 943 1 440
Profit on sale of property, plant and
equipment (98) (71)
Impairment (impairment reversal) of assets 39 (8)
Exceptional items - continuing operations (58) 431
Exceptional items - included in income from
associates and joint ventures 4 4
Exceptional items - discontinued operations (30) (571)
Taxation 31 104
Non-controlling interests 10 (2)
Headline earnings - basic 1 841 1 327
Attributable to preferred ordinary
shareholders 78 78
Headline earnings - diluted 1 919 1 405
Preferred ordinary shares - Basic (cents) 535 535
Additional information
Net asset value per share (cents) 5 529 4 820 15
Number of ordinary shares (million)
- in issue 187,0 188,3
- weighted average 185,7 185,5
- weighted average for diluted earnings 204,0 208,0
Number of other shares in issue (million)
- Preferred ordinary 14,5 14,5
- Deferred ordinary 15,9 16,8
Net finance cost Rm Rm
Net interest paid 633 862
Foreign exchange gain on monetary items (222) (216)
Fair value loss on interest swaps 186 277
Net finance cost - continuing operations 597 923
Net finance cost - discontinued operations 25 99
Exceptional items - continuing operations Rm Rm
Impairment of goodwill (108) (194)
Profit on sale of Imperial Bank Limited 131
Recognition of deferred profit on sale of
Dawn Limited 22
Net profit (loss) on disposal and
rationalisation of investments in subsidiaries
and other associates and joint ventures 13 (20)
Loss on sale of Eqstra Holdings Limited
shares (217)
58 (431)
Exceptional items - discontinued operations Rm Rm
Fair value profit (loss) on Aviation
disposal group 30 (4)
Profit on sale of Tourvest 575
Taxation (87)
30 484
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Restated
Audited Audited
2010 2009
at 30 June Rm Rm
ASSETS
Intangible assets 1 006 901
Investments in associates and joint ventures 1 190 2 334
Property, plant and equipment 5 983 5 976
Transport fleet 3 399 3 483
Vehicles for hire 2 237 1 653
Deferred tax assets 658 645
Other investments and loans 2 021 1 136
Other non-current financial assets 206 203
Inventories 6 809 5 592
Taxation in advance 126 154
Trade and other receivables 6 165 5 633
Cash resources 3 199 4 655
Assets classified as held for sale 747 950
Final instalment on sale of Imperial Bank Limited 477
Total assets 34 223 33 315
EQUITY AND LIABILITIES
Capital and reserves
Share capital 10 10
Shares repurchased (1 816) (1 816)
Other reserves 433 280
Retained earnings 12 513 11 300
Attributable to Imperial Holdings` shareholders 11 140 9 774
Non-controlling interests 806 587
Total shareholders` equity 11 946 10 361
Liabilities
Non-redeemable, non-participating preference shares 441 441
Retirement benefit obligations 222 256
Interest-bearing borrowings 7 833 9 794
Insurance and investment contracts 1 093 1 356
Deferred tax liabilities 656 652
Other non-current financial liabilities 312 157
Trade and other payables and provisions 11 123 9 338
Current tax liabilities 335 501
Liabilities directly associated with assets
classified as held for sale 262 459
Total liabilities 22 277 22 954
Total equity and liabilities 34 223 33 315
Capital commitments 882 544
Contingent liabilities 201 256
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Restated
Audited Audited
2010 2009
for the year ended 30 June Rm Rm
Cash flows from operating activities
Cash generated by operations before movements
in working capital 4 498 4 324
Net working capital movements 255 1 429
Cash generated by operation before net capital
expenditure on rental assets* 4 753 5 753
Expansion capital expenditure - rental assets# (521)
Net replacement capital expenditure - rental assets# (367) (460)
- Expenditure (1 489) (1 396)
- Proceeds 1 122 936
Cash generated by operations 3 865 5 293
Net financing costs (658) (961)
Taxation paid (1 075) (739)
2 132 3 593
Cash flows from investing activities
Proceeds from discontinued operations 1 340
- Sale of Tourvest 1 003
- Sale of Safair Lease Finance 337
(Expenditure) proceeds from continuing operations
- Net acquisition of subsidiaries and businesses (415) (340)
- Expansion capital expenditure - excluding rental
assets (442) (640)
- Net replacement capital expenditure - excluding
rental assets (463) (577)
- Proceeds from the sale of Imperial Bank Limited 1 374
- Net movement in other associates and joint ventures (271) (226)
- Net movement in investments, loans and other
non-current financial instruments (778) 967
(995) 524
Cash flows from financing activities
Hedge cost premium paid (5) (137)
Purchase of ordinary shares for hedging of share scheme (200)
Dividends paid (653) (765)
Decrease in interest-bearing borrowings (697) (137)
Change in non-controlling interest (29) (107)
(1 584) (1 146)
Net (decrease) increase in cash and cash equivalents (447) 2 971
Cash and cash equivalents at beginning of the year 2 631 (340)
Cash and cash equivalents at end of the year 2 184 2 631
Analysis of cash generated by operations
* Cash generated by operations before capital
expenditure on rental assets
- Continuing operations 4 443 5 187
- Discontinued operations 310 566
4 753 5 753
# Net capital expenditure on rental assets
- Continuing operations (955) (538)
- Discontinued operations 67 78
(888) (460)
Cash generated by operations
- Continuing operations 3 488 4 649
- Discontinued operations 377 644
3 865 5 293
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Shares Other Retained
capital re-purchased reserves earnings
for the year ended 30 June Rm Rm Rm Rm
Balance at 30 June 2008
- Audited 10 (1 816) 1 273 10 138
Total comprehensive
income for the year (578) 1 518
Transfer to translation reserve 5 (5)
Transfer of reserves on
disposal of assets (261) 261
Statutory reserves (77) 77
Share option hedging cost (137)
Movement in share-based
equity reserve 55
Dividends paid (689)
Net decrease in
non-controlling interest
Non-controlling interest
share of dividends
Balance at 30 June 2009
- Audited 10 (1 816) 280 11 300
Total comprehensive
income for the year 64 2 021
Statutory reserves 38 (38)
Share-based equity
reserve utilisation (57)
Movement in share-based
equity reserve 134
Dividends paid (570)
Purchase and cancellation
of 2 123 775 ordinary shares (200)
Non-controlling interest
arising on business
combinations and disposals
Net decrease in
non-controlling interest (26)
Non-controlling share of dividends
Balance at 30 June 2010
- Audited 10 (1 816) 433 12 513
Total interest Total equity
for the year ended 30 June Rm Rm Rm
Balance at 30 June 2008 - Audited 9 605 811 10 416
Total comprehensive income for the year 940 125 1 065
Transfer to translation reserve
Transfer of reserves on disposal of assets
Statutory reserves
Share option hedging cost (137) (137)
Movement in share-based equity reserve 55 55
Dividends paid (689) (689)
Net decrease in non-controlling interest (273) (273)
Non-controlling interest share of
dividends (76) (76)
Balance at 30 June 2009 - Audited 9 774 587 10 361
Total comprehensive income for the
year 2 085 238 2 323
Statutory reserves
Share-based equity reserve utilisation (57) (57)
Movement in share-based equity reserve 134 (2) 132
Dividends paid (570) (570)
Purchase and cancellation of 2 123 775
ordinary shares (200) (200)
Non-controlling interest arising on
business combinations and disposals 69 69
Net decrease in non-controlling
interest (26) (3) (29)
Non-controlling share of dividends (83) (83)
Balance at 30 June 2010 - Audited 11 140 806 11 946
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 30 June 2010 and the AC500 standards issued by the Accounting
Practices Board or its successor. The results are presented in terms of IAS 34
- Interim Financial Reporting and comply with the Listings Requirements of the
JSE Limited.
These condensed consolidated financial statements were approved by the board of
directors on 24 August 2010.
Accounting policies
The accounting policies adopted and methods of computation used in the
preparation of the condensed consolidated financial statements are in terms of
IFRS and are consistent with those of the annual financial statements for the
year ended 30 June 2009 except for the adoption of new or revised accounting
standards, interpretations and circulars and restatements which are described
below.
None of the changes below have impacted the 30 June 2008 statement of financial
position and it has therefore not been re-presented.
New accounting standards
The Group adopted accounting standards and interpretations that became
applicable during the current financial year.
Of the amendments included in the Improvements to IFRS the following standards
have had an impact on the Group`s accounting policies and methods of
computation:
- IFRS 3 - Business combinations;
- IAS 7 - Statement of cash flows;
- IAS 16 - Property, plant and equipment;
- IAS 27 - Consolidated and separate financial statements;
- IAS 28 - Investments in associates
The adoption of the above standards impacts the Group as follows:
1) Any excess arising from the buy-out of non-controlling interests is
recognised in equity;
2) Transaction related costs for new acquisitions are expensed in the
statement of comprehensive income;
3) Adjustments to warranty payment provisions are recognised in the statement
of comprehensive income;
4) Non-controlling interests share in accumulated losses above the equity
they contributed; and
5) Net capital expenditure for rental assets are shown under operating
activities in the statement of cash flows.
Amendments to these standards as noted under items 1 to 4 listed above have
been applied prospectively and have had no material impact to the statement of
comprehensive income and the statement of financial position. Item 5 was
applied retrospectively as detailed under restatements below.
The adoption of the revised IAS 1 - Presentation of Financial Statements, IAS
32 - Financial instruments presentation, IFRS 7 - Financial Instruments:
Disclosures and IFRS 8 - Operating segments introduced changes to the
presentation of the financial statements with no impact on the Group`s
accounting policies or methods of computations.
Circular 3/2009 - Headline earnings became applicable to Imperial on 1 July
2009. The impact of the adoption of the circular in the current financial year
was immaterial.
Restatements
Reclassification of car rental cash flows
Net capital expenditure for car rental assets has been restated from investing
activities to operating activities in the statement of cash flows. This is to
comply with amendments to IAS 16 - Property, plant and equipment and IAS 7 -
Statement of cash flows.
Reclassification of statement of comprehensive income (Income statement) The
statement of comprehensive income as published last year has not changed but
has been updated to include the other comprehensive income, resulting from
changes to IAS 1 - Presentation of financial statements.
Re-presentation of the consolidated statement of financial position
(Balance sheet) - Imperial Bank Limited
At the interim reporting stage all the conditions precedent to the sale of the
holding of 49,9% of Imperial Bank Limited had not been fulfilled, in that the
approval for the sale in terms of section 37 of the Banks Act had not been
obtained as had been anticipated by then. Consequently in the interim report,
the investment in Imperial Bank was reclassified under "Investments in
associates and joint ventures", from its previous presentation as "Associate
held for sale" with the comparative disclosure on the statement of financial
position being re-presented and our share of Imperial Bank Limited`s earnings
being equity accounted. Subsequent to this all approvals were obtained and the
transaction was concluded on 8 February 2010.
Subsequent events
In terms of the Ukhamba Black Economic Empowerment transaction, 883 090
deferred ordinary shares have converted to ordinary shares with effect from 1
July 2010. These shares will be listed on the Johannesburg Securities Exchange.
On 15 July 2010 the company announced its firm intention to make an offer to
acquire 100% of issued shares in CIC Holdings Limited, a company listed on the
Johannesburg Securities Exchange for a total cash consideration of R724
million.
There were no other material events that require disclosure that has occurred
subsequent to the balance sheet date.
Audit opinion
The auditors, Deloitte & Touche, have issued their opinion on the Group`s
financial statements for the year ended 30 June 2010.
The audit was conducted in accordance with International Standards on Auditing.
They have issued an unmodified audit opinion. A copy of their audit report is
available for inspection at the company`s registered office.
Operational segmental reporting
For management purposes, the Group is organised into five major operating
divisions - logistics, car rental and tourism, distributorships, automotive
retail and insurance. These divisions are the basis on which the Group reports
its primary segment information.
The principal services and products of each of these divisions are as follows:
Logistics - provides complete logistics solutions including transportation,
warehousing, inland waterway shipping, container handling and related value-
added services.
Car rental and tourism - vehicle rental operations span the domestic corporate
and leisure sectors as well as inbound tourists, with extensive support
services. Tourism operations include inbound tour operations and niche tourism
services.
Distributorships - this segment imports and distributes a range of passenger,
commercial vehicles, automotive products, industrial equipment, motorcycles and
light aircraft.
Automotive retail - consists of a large network of motor vehicle and commercial
vehicle dealerships in South Africa and representing most of the major original
equipment manufacturers (OEMs). Also manufactures and sells caravans.
Insurance - the insurance operations are focused on a range of short-, medium-
and long-term insurance and assurance products that are predominantly
associated with the automotive market.
BUSINESS COMBINATIONS
Nature of Date Interest Purchase
Subsidiaries and businesses business acquired acquired consideration
acquired transferred
Rm
Midas Group (Pty) Limited Autoparts December 75% 405
distributor 2009
Uvundlu Investments (Pty) Distributor May 2010 65% 110
Limited* of
industrial
equipment
Individually immaterial 66
business combinations
Total 581
*Acquired through Associated Motor Holdings (Pty) Limited.
Reason for the acquisition
Midas Group (Pty) Limited was acquired to improve the Group`s presence in the
after sales parts business.
Uvundlu Investments (Pty) Limited was acquired to expand our distribution
business.
Impact of the acquisitions on the results of the Group
From the dates of their acquisition, the acquired businesses contributed
revenues of R1 669 million and attributable profit of R55 million. Had all the
new acquisitions been consolidated from 1 July 2009 the statement of
comprehensive income would have included total revenue of R3 073 million and
attributable profit of R89 million for the 12 months ended 30 June 2010. The
numbers were estimated using the Group`s accounting policies.
Details of contingent consideration
The contingent consideration required the Group to pay the vendors an
additional total amount of R59 million over three years if the entities` net
profit after tax exceeds certain earnings targets. Acquisition-related costs
amounting to R3 million have been excluded from the purchase consideration and
have been recognised as an expense in the period, within `Net operating
expenses` in the statement of comprehensive income.
Midas Group
Total (Pty) Limited
Fair value of assets acquired and liabilities
assumed at date of acquisition: Rm Rm
Assets
Intangible assets 7
Investment in associates and joint ventures 1
Property, plant and equipment 57 28
Transport fleet 14
Vehicles for hire 104
Inventories 287 239
Trade and other receivables 348 284
Cash resources 133 114
951 665
Liabilities
Deferred tax liability (1)
Interest-bearing borrowings (79)
Other non-current financial liabilities (5)
Trade and other payables and provisions (450) (358)
Current taxation (17) (14)
(552) (372)
Acquirees carrying amount at acquisition 399 293
Less: Non-controlling interest (108) (73)
Net assets acquired 291 220
Purchase consideration transferred 581 405
Cash 522 373
Contingent consideration 59 32
Goodwill arising on acquisition 290 185
Individually
Uvundlu immaterial
Investments business
(Pty) Limited combinations
Fair value of assets acquired and liabilities
assumed at date of acquisition: Rm Rm
Assets
Intangible assets 7
Investment in associates and joint ventures 1
Property, plant and equipment 24 5
Transport fleet 14
Vehicles for hire 104
Inventories 48
Trade and other receivables 48 16
Cash resources 17 2
242 44
Liabilities
Deferred tax liability (1)
Interest-bearing borrowings (69) (10)
Other non-current financial liabilities (5)
Trade and other payables and provisions (80) (12)
Current taxation (3)
(153) (27)
Acquirees carrying amount at acquisition 89 17
Less: Non-controlling interest (31) (4)
Net assets acquired 58 13
Purchase consideration transferred 110 66
Cash 110 39
Contingent consideration 27
Goodwill arising on acquisition 52 53
The receivables acquired had gross contractual amounts of R369 million and the
best estimate of the contractual cash flow not expected to be collected is R21
million. The goodwill arising from the acquisitions consists largely of a
control premium and synergies expected. None of the goodwill is expected to be
deductible for tax purposes. Non-controlling interest has been calculated based
on their proportionate share in net assets.
CORPORATE INFORMATION
Non-executive directors
TS Gcabashe (Chairman), T Dingaan, S Engelbrecht, P Langeni, MJ Leeming,
JR McAlpine, MV Moosa, RJA Sparks, A Tugendhaft (Deputy chairman), Y Waja
Executive Directors
HR Brody (Chief Executive), OS Arbee, MP de Canha, RL Hiemstra,
AH Mahomed, GW Riemann (German), M Swanepoel
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 (Pty) Limited, 70 Marshall Street,
Johannesburg, 2001
Sponsor
Merrill Lynch SA (Pty) Limited
138 West Street, Sandown, Sandton, 2196
Imperial Holdings Limited
Registration number: 1946/021048/06
Ordinary share code: IPL ISIN: ZAE000067211
Preference share code: IPLP ISIN: ZAE000088076
The full results announcement including the segment reports is available on the
Imperial Holdings Website:
www.imperial.co.za
Date: 25/08/2010 07:44:01 Produced by the JSE SENS Department.
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