| Thu 28 Feb 2002, 0:00 | | Imperial Holdings Limited - Interim Results For Th |
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December 2001
Imperial Holdings Limited
Interim results
for the half year ended 25 December 2001
Revenue up 27% to R13 652 million
Headline earnings per share up 17%
Cash generated by operations up to R1 253 million
Income statement
Half year ended 25 December 2001
Restated
Year ended
Unaudited 25 June
2001 2000 % 2001
Rm Rm change Rm
Revenue 13 652 10 761 27 21 874
Profit from operations
before depreciation and
amortisation (EBITDA) 1 555 1 253 24 2 658
Depreciation and
amortisation, net
of recoupments 513 378 810
Profit from operations 1 042 875 19 1 848
Net financing costs (240) (205) (428)
Income from associates 19 10 42
Profit before
exceptional items 821 680 21 1 462
Exceptional items (14) 92
Income before taxation 807 680 19 1 554
Taxation 208 162 291
Income after taxation 599 518 16 1 263
Outside shareholders'
interest 43 34 60
Net profit for the
period 556 484 15 1 203
Cents Cents Cents
Headline earnings per
share* (cents) 273 234 17 528
Net asset value per
share (cents) 3 541,4 2 951,6 3 280,6
Number of shares (million)
- in issue 214,0 212,0 215,6
- weighted average 215,8 211,0 212,6
Earnings per share
reconciliation*
Headline earnings per
share before restatements
outlined below 236,4 535,0
Change in accounting
policies to comply
with new accounting
standards (note 1) (2,7) (7,4)
Headline earnings per
share 272,6 233,7 17 527,6
Goodwill amortisation (10,6) (3,6) (7,3)
Exceptional non-recurring
items (6,4) 43,5
Profit on sale of
property, plant and
equipment 2,0 (0,8) 2,3
Earnings per share 257,6 229,3 12 566,1
* Based on the weighted average number of shares in issue
Note 1. Change in accounting policy
During the year the group adopted the following new accounting policies.
The group adopted AC116 (Employee benefits) which had the effect of reducing
operating profit by R4 million for December 2000 and increasing the leave
pay provision at June 2001 by R43 million.
The group adopted AC135 (Investment properties) which requires that owner
occupied properties be depreciated in terms of AC123 (Property, plant and
equipment). This had the effect of increasing the depreciation charge to the
income statement by R6 million for December 2000 and reducing the carrying
value in the balance sheet by R76 million at June 2001.
Because of various disclosure requirements certain of the figures in prior
reporting periods have been restated.
Except as stated above, the principal accounting policies adopted in the
preparation of this interim report are consistent in all material respects
with those applied in the previous annual report.
The financial statements are prepared in accordance with, and comply with,
Standards of Generally Accepted Accounting Practice in South Africa,
effective for the group's financial period.
Additional information
Income before taxation Rm Rm Rm
This is stated after
investment income
- dividends 5 4 15
Interest income/(cost)
- Financial services
business 11 153 142
- Other operations (240) (205) (428)
Foreign exchange gains 91 30 48
Exceptional items (14) - 92
- Profit on sale of
50,1% of Imperial
Bank Limited - - 137
- Banking provision
regulation adjustment - - (6)
- Impairment of assets - - (31)
- Deconsolidation and
restructuring of
investments in
subsidiaries and
associates (14) - (8)
Abridged cash flow
Half year ended 25 December 2001
Year ended
25 June
2001 2000 2001
Rm Rm Rm
Cash generated by operations 1 253 800 2 247
- Net financing costs (240) (205) (428)
1 013 595 1 819
- Dividends paid (231) (2) (22)
- Taxation paid (190) (113) (252)
592 480 1 545
Utilised in investing activities (1 589) (1 576) (2 503)
Invested in banking activities - (64) 626
Net cash flow from financing
activities 496 382 514
Net movement in cash and cash
equivalents (short-term finance) (501) (778) 182
Net short-term finance at
beginning of period (66) (248) (248)
Net short-term finance
at end of period (567) (1 026) (66)
Balance sheet
at 25 December 2001
Restated
Unaudited 25 June
2001 2000 2001
Rm Rm Rm
Property, plant and equipment 2 049 1 277 1 539
Intangible assets 634 252 280
Investments in associates and
joint ventures 1 425 65 1 234
Other investments and loans 603 844 710
Banking and other advances - 3 649 -
Deferred taxation 259 99 166
Aviation leasing fleet 2 033 1 570 1 695
Transport and allied assets 2 186 1 565 1 804
Motor vehicles for hire 1 723 1 569 1 632
Inventories 2 687 2 421 2 538
Trade and other receivables 4 556 3 295 3 298
Cash and cash equivalents 1 604 820 1 508
Total assets 19 759 17 426 16 404
Insurance funds 344 229 247
Banking liabilities - 2 102 -
Interest-bearing borrowings 5 286 4 026 4 110
Deferred taxation 265 159 251
Other liabilities 5 837 4 543 4 623
Total liabilities 11 732 11 059 9 231
Net assets 8 027 6 367 7 173
FUNDED BY
Shareholders' equity 7 641 6 270 6 988
Outside shareholders' interest 386 97 185
Total shareholders' equity 8 027 6 367 7 173
Supplementary information
Investments
Listed at market value 338 539 419
Unlisted at directors' valuation 131 162 194
Loans receivable 143 148 112
Capital expenditure 2 103 1 375 3 801
Capital commitments 1 321 218 214
Statement of changes in equity
Half year ended 25 December 2001
Share Non-
capital distributable Distributable
and premium reserve reserve Total
Rm Rm Rm Rm
Balance at 25 June
2001 as restated
(see note 1) 3 595 127 3 266 6 988
Translation of
foreign entities not
recognised in the
income statement 406 406
Net profit for the
period 556 556
Share of non-
distributable and
distributable reserves
of associates 41 (19) 22
Contingency reserve (4) 4 -
Dividend declared (215) (215)
Purchase of 2402512
Imperial Holdings
shares at R54,86
each (131) (131)
Issue of 636 600
ordinary shares in
terms of the share
option scheme 15 15
Balance at
25 December 2001 3 479 570 3 592 7 641
Divisional analysis
Half year ended 25 December 2001
Restated
Year ended
Unaudited 25 June
2001 2000 % 2001
Rm Rm change Rm
Revenue
Insurance 559 451 24 862
Leasing and fleet
management 567 479 18 1 033
Aviation leasing 873 792 10 1 460
Logistics and
transport 5 169 3 914 32 8 745
Car rental and
tourism 1 306 633 106 1 294
Distributorships 1 922 1 878 2 3 320
Motor vehicle
dealerships 4 950 4 023 23 7 956
Group and
eliminations (1 694) (1 713) (3 113)
13 652 10 457 31 21 557
Banking - 304 317
13 652 10 761 27 21 874
Profit from operations
Insurance 47 44 7 136
Leasing and fleet
management 191 170 12 335
Aviation leasing 130 93 40 205
Logistics and
transport 236 166 42 354
Car rental and
tourism 165 82 101 165
Distributorships 103 114 (10) 273
Motor vehicle
dealerships 123 101 22 211
Group and
eliminations (14) 7 14
981 777 26 1 693
Banking 61 98 155
1 042 875 19 1 848
FINANCIAL RESULTS
The Imperial group enjoyed substantial revenue growth of 27% to R13,7
billion in the six months to 25 December 2001, whilst headline earnings per
share rose from 234 cents to 273 cents, an increase of 17%. Revenue growth
from Imperial's local operations was a pleasing 24% and the growth from our
non-South African businesses was 34%, largely reflecting real growth and
aided by the sharp deterioration in the value of the rand.
The overall margin has declined from 8,1% to 7,6% substantially because of
the mix of the business and the pressures experienced by the import
distribution businesses. Excluding Imperial Bank, which is now an associate,
revenue has increased by 31% and operating profit by 26%. The tax rate has
gone up from 24% to 26%.
Subject to shareholder approval, it is proposed that a capital distribution
of 110 cents per share in lieu of a dividend be made.
During the period under review, the group benefited from significant foreign
currency gains arising from its offshore activities. These gains totalled
R497 million of which R406 million relates to the translation of the balance
sheets of foreign entities and our investment in those businesses, and has
been credited directly to non-distributable reserves. The remaining amount
of R91 million relates to bank balances throughout our group and has been
separately recognised within operating income. This treatment of the foreign
currency gains is in compliance with South African Generally Accepted
Accounting Practice (SA GAAP). These foreign currency gains provide the
group with a currency hedge against the pressures faced in our import
distribution business.
Important rand hedge qualities are emerging as 20% of our equity is invested
offshore.Currently, in excess of 20% of the group's operating profit is
derived from hard currencies.
Cash generated by operations improved from R800 million to R1,25 billion.
Outflows relating to tax, finance costs and dividends amounted to
R661 million. Net investment activities totalled R1,59 billion and included
the Tourvest acquisition cost and the significant ongoing expansion of the
asset base of aviation leasing, transport and allied and vehicles for hire.
The group also invested R131 million in share buy-backs, having obtained the
necessary shareholder approval at the 2001 annual general meeting.
Important activities during the period under review included:
- the acquisition of 64% of Tourvest
- together with Ukhamba, our empowerment partner and other parties, the
acquisition of the Citroen distributorship for South Africa
- the successful award of the Northern Cape government vehicle leasing
contract
- the merger of Regent Life Namibia with Capricorn Life Namibia
- the opening of new motor dealerships for the growth of our vehicle
distribution businesses
- the awarding of the Sixt Car Rental franchise to the group
- growth in our international logistics, leasing and aviation businesses.
The group's balance sheet is very strong and reflects growth of 20% in total
assets to just short of R20 billion. All the group's assets are financed on
balance sheet and equally all borrowings are reflected in the balance sheet.
The group's leasing and rental assets are R4,5 billion which figure will
increase to R5,4 billion during the second half of the year when the assets
to service the recently announced DHL International leasing contract are
acquired.
To fund the continuing growth of the business, net debt has increased by
R1,1 billion and at 25 December 2001, the group's net debt to equity
percentage was 46%. This is conservative considering that the group's
leasing and rental assets exceed net debt by R800 million.
The main source of the funding has been through the utilisation of the
group's Domestic Medium Term Note programme. In September 2001 we issued the
first tranche of R800 million. It is our intention to continue with this
form of funding, when suitable, to expand our activities and in February
2002 we successfully issued a second R800 million bond. Another benefit of
this strategy is that, the mix between long-term and short-term debt is now
weighted towards long-term, and more appropriately matches the profile of
assets on our balance sheet.
REVIEW OF OPERATIONS
Insurance
Revenues increased by 24% to R559 million due mainly to higher credit life
assurance business. Operating profit increased by 7% to R47 million,
impacted mainly by reduced investment income arising from a smaller
investment base due to the payment last year of dividends totalling R275
million. Notwithstanding very competitive short-term underwriting
activities, the businesses continue to deliver acceptable levels of
profitability.
Leasing and fleet management
Revenues increased by 18% to R567 million although margins were under
pressure, mainly due to weak margins in the forklift business, resulting in
operating profit growth of 12% to R191 million. The Government of the
Northern Cape contract (concluded towards the end of the reporting period)
contributed to the revenue growth, but contract start-up costs affected
margins. Private sector operations also traded in a highly competitive
environment.
Aviation leasing
The performance of this business continues to be outstanding. Operating
profit of R130 million reflected strong growth of 40%, although revenues
increased by only 10% to R873 million. This was largely the result of the
sales mix at NAC between new and used aircraft and lower revenues from NAC's
charter business. The operating margin improved to 14,9%, assisted by
favourable foreign revenue streams from international contracts held by both
Safair and NAC, as well as strong organic growth. During the period Safair
further expanded its international leasing business with the delivery of
three new aircraft on long-term leases to Jet Airways in India. Despite the
events of 11 September, all customers continue to honour their contracts,
and the tragic events have not affected the division's profitability.
The well-balanced aviation leasing fleet and lease portfolio, in terms of
aircraft type, age, as well as geographic distribution, contributed
significantly to the quality and stability of earnings. 30% of the fleet, by
value, comprises cargo aircraft and the balance is passenger aircraft. About
60% of Safair's revenues are generated in hard currencies from a customer
base that is geographically diversified and includes Australia, Singapore,
India, African and European countries and the United States. These leases
include highly specialised Hercules operations in a market where Safair is
acknowledged as the market leader.
All aircraft financing is carried on balance sheet and some 95% of all
financing is rand-based. Aircraft book values and residual value assumptions
are confirmed as conservative following a rigorous review of values
undertaken after the events of 11September 2001, and the devaluation of the
rand.
Logistics and transport
Expansion in this division continues and revenues consequently increased by
32% to R5,17 billion, influenced strongly by good revenue growth in the
offshore operations centred in Germany. Operating profit increased by 42% to
R236 million.
Our offshore businesses increased their revenues substantially in euros and
now account for 59% of the division's revenues. The local operations
performed well, having concluded the tail end of restructuring activity in
the flat deck business.Trading conditions remain competitive, and we are
gradually improving our position.
Car rental and tourism
As a result of the Imperial acquisition of Tourvest in July 2001, the
division's total revenue grew 106% to R1,3 billion, whilst operating profit
increased by 101% to R165 million.
The local car rental businesses increased their revenues by 8%. Europcar,
our brand focusing on international in-bound business, grew revenues
strongly by 29%. Car rental support services achieved good results. Adverse
trading conditions affected our small UK business. We closed our Australian
business shortly after the previous financial year-end.
Tourvest increased revenues by 23% to R604 million, operating profit by 11%
to R65,5 million and headline earnings per share by 14% to 5,8 cents.
Margins were, however, negatively affected by lower outbound business and
higher operating costs.
Pleasingly, both the car rental business and Tourvest reported very good
trading for the month of December 2001, and the positive trend is continuing
during this tourist season.
Distributorships
The sharp decline in the value of the rand significantly impacted on the
trading performance of our distributorship business with revenues increasing
by 2% to R1,92 billion. Operating profit of R103 million reflected a decline
of 10%, due largely to the effect of the pressure on margins arising from
the impact of the currency decline on imported motor vehicles. Despite the
margin pressure, the imported motor vehicle distribution businesses enjoyed
solid volume growth. It is important to note the significant growth of
imported motor vehicles since 1994, when they represented a mere 1% of the
South African motor vehicle market, to 28% in 2001. This dramatic growth has
taken place against the background of the substantial devaluation of the
rand from approximately R3,50/US$ to more than R10/US$ during the same
period, and encouraged by the enlightened and positive Motor Industry
Development Programme (MIDP).
The forklift distribution business both locally and in the UK also struggled
and results were in line with the prior period. Tyco truck distribution
revenues declined sharply as the business continues to be affected by the
currency weakness. However, improved efficiencies are being achieved and
these should positively impact on the operation's future performance.
Motor dealerships
Revenues increased by 23% to R4,95 billion and operating profit by 22% to
R123 million. Solid performances were achieved by most of the dealerships
due to good market conditions. The division enjoyed outstanding results with
good growth in market shares of existing brands. Imported brands have also
grown their market shares.
The motor dealerships enjoy a diverse source of operating profits arising
from new vehicles, used vehicles, parts, servicing and financial services.
The used car business was particularly buoyant and this trend is continuing.
Associates
In January 2001, the group sold 50,1% of its share in Imperial Bank to the
Nedcor group. The agreement included Nedcor assuming responsibility for the
funding of Imperial Bank.
The bank enjoyed an outstanding year and achieved 40% growth in its advances
book to R5,3 billion. The quality of the advances book improved over the
year and the bank contributed R17 million to the group's income for the half
year.
Establishment costs and the currency impact severely affected our Citroen
associate, resulting in a loss.
The group has recently acquired control of Imperilog at a price of 180 cents
a share. The acquisition is subject to Competition Commission approval and
an offer has been made to Imperilog minorities at the same price.
PROSPECTS
Current developments in the South African economy reflect generally less
attractive growth prospects in the short term. Whilst the currency has
improved from its low point in December 2001 and the recent Budget should
help restore consumer confidence, higher interest rates and inflationary
pressures are likely to curb demand in some of the group's operations.
The weak currency will continue to affect the distributorship's business,
keeping margins under pressure, although their first half performance should
be maintained. Motor dealership volumes are expected to decline due to
current and impending above-average price increases. However, motor
dealership revenues will be higher, supported by the firm used car market.
The foreign currency gains which benefited the group in the first six
months, are likely to be somewhat eroded in the second half of the trading
year.
Nevertheless, the contra-cyclical nature of Imperial's diverse activities
and the consumer-friendly Budget should mitigate against many of the
negative factors. It remains management's objective to focus firmly on the
group's core activities in the area of transportation and mobility and to
achieve acceptable levels of return from our operations.
Against the background of a slower economy, we expect a challenging second
half, but remain optimistic in the circumstances and we will be seeking to
deliver satisfactory growth.
By order of the board
LBOYD WG LYNCH AH MAHOMED
Chairman Chief executive Financial director
Johannesburg
28 February 2002
CAPITAL DISTRIBUTION
Notice is hereby given that the board of directors has proposed a capital
distribution of 110 cents per share instead of an ordinary dividend for the
period ending 25 December 2001, subject to approval being obtained from
shareholders for the distribution. A circular and notice of general meeting
of shareholders regarding the capital distribution will be posted to
shareholders on Monday, 11 March 2002. Subject to the approval by the
shareholders of the company being obtained, the following dates for the
capital distribution will apply:
Salient dates for the capital distribution
Circular to shareholders and notice of
general meeting posted Monday, 11 March 2002
Meeting of shareholders to approve
the distribution Monday, 15 April 2002
Last day to trade (cum distribution) Thursday, 25 April 2002
First date of trading (ex distribution) Friday, 26 April 2002
Record date Friday, 3 May 2002
Payment date Monday, 6 May 2002
Share certificates may not be dematerialised or re-materialised between
Friday, 19 April 2002 and Friday, 3 May 2002, both days inclusive.
On Monday, 6 May 2002, the capital distribution will be electronically
transferred to the bank accounts of all certificated shareholders where this
facility is available. Where electronic fund transfers are not available or
desired, cheques dated 6 May 2002 will be posted on that date. Shareholders
who have dematerialised their share certificates will have their bank
accounts, which are linked to their CSDF or brokers' safe custody accounts,
credited on Monday, 6 May 2002.
Non-executive directors
L Boyd (Chairman), P Abelkop, PL Erasmus, JR McAlpine, E Molobi, A
Tugendhaft
Executive directors
WG Lynch (Irish), RL Hiemstra, AH Mahomed, GW Riemann (German), CE Scott
Secretary
R Mumford
Executive board
WG Lynch RJ Bo ttger MP de Canha RL Hiemstra AH Mahomed CE Scott
The full results announcement is available for viewing on the Imperial
Holdings website: www.imperial.co.za.
Business address and registered office
140 Boeing Road East, Elma Park, Edenvale 1609
Share transfer secretaries
Mercantile Registrars Ltd, 11 Diagonal Street, Johannesburg 2001
Sponsor
Merrill Lynch SA(Pty) Limited, 138 West Street, Sandown, Sandton 2196
Imperial Holdings Limited
Registration number (1946/021048/06)
Short name: IMPERIAL
JSE Code: IPL
ISIN:ZAE 000003620
www.imperial.co.za
