| Wed 24 Aug 2005, 11:14 | | Imperial Holdings Limited - Audited Results For Th |
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IMPERIAL HOLDINGS LIMITED
(Registration number 1946/021048/06)
Share code: IPL ISIN code: ZAE000067211
Audited results for the year ended 25 June 2005
OPERATIONAL ANDFINANCIAL HIGHLIGHTS
- Revenue up 22% to R42.5 billion
- Headline earnings per share up 25% to 1046 cents
- Return on equity improved to 22%
- Distribution per share up by 25%
- An outstanding performance from our distribution and insurance divisions
- The conclusion of a second BEE transaction
- An upgrade to our international scale credit rating to Baa1
OVERVIEW
Imperial Holdings had an outstanding year during which the group's 18 year
record of uninterrupted growth since listing was extended with headline earnings
per share growth of 25%.
The macroeconomic environment was generally supportive, with strong economic
growth, relatively low interest rates and muted inflation combining to generate
significant momentum in the consumer environment. The strong rand supported
consumer demand for our products but impinged on results in our tourism and
aviation businesses.
The group's revenue improved by 22% against last year and operating profits grew
by 23%. Cash generation was also good with operating cash flow after adjusting
for replacement capital expenditure (free cash flow) of R2.3 billion. The return
on equity increased to 22,0% from 20.3% in 2004 as a result of strong growth in
profits, share buy-backs and an increase in the use of debt funding.
We continued to expand key growth areas in our business. Thirty one new
dealerships were added to our network and we acquired nine Ford dealerships in
Australia. Four bolt-on acquisitions were added to our South African logistics
business and two to our German operations. In our insurance division, we
acquired a 60% stake in Lesotho National Insurance Holdings. Our leasing
division won a number of new outsourcing contracts despite flat market
conditions and the aviation businesses expanded their specialised operations
fleet, added territories to its distribution rights for Raytheon products and
acquired Naturelink. Our car rental and tourism interests expanded their
regional presence and the insurance operations focused on expanding their
distribution network.
In the interest of better focus, the group disposed of its European based
clearing and forwarding business, JH Bachmann effective from 1 June 2005 to the
European logistics group, DFDS Transport. We also disposed of our interests in
DAWN Limited to Ukhamba Holdings and Sani-Tech to a BEE investor. These
disposals resulted in a profit of R344 million.
Imperial received an upgrade to its international scale credit rating from
Moody's Investors Service from Baa2 to Baa1. This is equivalent to South
Africa's sovereign rating and positions the group well to raise capital abroad
should the need arise.
The board approved a final distribution for the year of R2.20 per share,
bringing the total distribution to R3.95 per share, increasing by 25% over 2004.
INCOME STATEMENT
Revenue increased by 22% to R42.5 billion amidst strong trading conditions in
many areas of the business. The operating margin was maintained at 8.3%, which
together with the increased revenue resulted in operating profits of R3.5
billion, up 23% against the corresponding period.
Despite lower inflation and its effect on the residual values in all our fleet
owning businesses, recoupments of depreciation on asset disposal remained high
at R217 million (2004: R302 miilion). In order to better reflect true
depreciation, the annual depreciation rate on vehicles for hire was decreased
from 25% to 20% per annum, which resulted in a R41 million reduction in the
depreciation charge net of recoupments. Overall depreciation net of recoupments,
at R1 322 million increased by 11% against a 17% increase in the group's fleet
assets.
The slight weakening of the rand during the latter part of the financial year
had a positive impact on the results. A realised forex gain of R7 million was
recorded against a loss of R30 million last year, and fair value gains on
foreign exchange derivatives amounted to R107 million against an R82 million
loss in the previous year. Fair value gains on equity investments of our
insurance businesses were also higher at R190 million (2004: R49 million).
Interest cost increased principally due to fair value losses on debt and swap
instruments of R32 million compared to gains of R55 million last year. Net
finance costs amounted to R586 million (2004: R478 million).
Income from associates declined from R228 million to R216 million as a result of
the disposal of the interest in DAWN Limited and a decline in profits of Safair
Lease Finance and Imperial Bank.
Our tax rate increased to 32.6% from 31.2% in the previous year despite the 1%
lower corporate tax rate. This resulted predominantly from the receipt of a
revised assessment on a finance structure. While we will challenge this
assessment, we regard it prudent to provide for the revised charge.
Headline earnings per share increased by 25% to R10.46 versus a restated base of
R8.36 (previously R8.41). The previous year's income statement was restated to
account for changes to the basis of accounting for operating leases.
Earnings per share increased by 46% to R11.68.
BALANCE SHEET
The group's balance sheet remains resilient. During the period the group's total
assets expanded by 24% to R29 billion. This growth was driven primarily by an
expansion in the leasing and fleet management, distributorships, dealerships,
and insurance management businesses.
The balance sheet structure of the group remained conservative. Gross debt to
equity increased from 73% to 80% and from 59% to 69% net of cash. A strategy is
currently being implemented which would ultimately facilitate more appropriate
gearing of our quasi banking assets through the planned ring-fencing of our
fleet assets in a separate entity. In this way, the group would be able to
secure long term matched maturity funding in the capital markets at more
competitive rates. Were we to apply an appropriate gearing level of say 4:1 to
the group's vehicle fleets of R6.5 billion, the remainder of the group's balance
sheet would be only marginally geared.
In terms of the Lereko empowerment transaction which was concluded at the year-
end, we recognised a creditor of R1.4 billion of which up to R836 million will
be reinstated as equity when the debt raised to fund the share purchase is fully
or partially settled in five years' time.
CASH FLOW
Cash flow from operating activities increased from R3.1 billion to R3.2 billion
despite absorbing an increase in net working capital of R473 million. Working
capital increased mainly as a result of an increase in inventories necessitated
by the substantial growth in trading activity in the distributorships division.
The group's free cash flow of R2.3 billion equates to 110% of headline earnings
(2004: 144%), reflecting the group's ability to generate strong cash flows.
Expansion capital expenditure increased from R1.2 billion to R1.9 billion and
replacement capital expenditure went up from R0.7 billion to R0.9 billion as a
result of the increase in the revenue producing assets.
INTERNATIONALFINANCIALREPORTINGSTANDARDS
The group will be implementing International Financial Reporting Standards
(IFRS) with effect from the 2006 financial year. Accordingly, we will report our
interim results to 25 December 2005 under the new standards. In preparation for
this change, considerable work has been done on assessing the likely impact of
the new standards, which also require opening balances for the comparative
period, i.e. balances at 26 June 2004, to be adjusted to the new accounting
guidelines.
Initial indications from this process are that the impact on the group's income
statement is relatively limited, while the impact on the balance sheet is
significant. A detailed analysis of the estimated impact of the adoption of
IFRS on the group's financial reporting is set out in a separate announcement
released on SENS today. This can also be viewed on www.imperial.co.za.
The balance sheet impact arises predominantly from the assessment of the group's
aviation assets. The aviation division (including Safair Lease Finance, a joint
venture in aviation finance with Sanlam and ACL Aviation an associate) has long
term leases of up to ten years with strong counter parties. In terms of South
African GAAP, and prior to the adoption of IFRS, the carrying value of each
aircraft was subjected to an impairment test from time to time, to determine a
value in use, whereby such carrying value is written down to the higher of net
realisable value or the aggregate of the net present value of (i) future cash
flows from the long term leases and (ii) the rand based residual value at the
end of the lease term, which was established in US$ and translated using a
forward exchange rate derived from a market related forward exchange curve.
In terms of IFRS, the carrying value of the relevant assets will be stated at
their current market value as their deemed cost, which is determinable in US$
and converted to rand at the ruling exchange rate. The difference in carrying
value determined in terms of SA GAAP in accordance with the impairment test
referred to above is that SA GAAP recognises the present value of future cash
flows from the long term lease rentals as well as the residual value at the end
of the lease term as converted from US$ to rand at a forward exchange rate, and
in terms of IFRS the current market value is used.
We estimate that as a result of the implementation of IFRS, the carrying values
of Imperial's investment in SLF will be reduced by approximately R420 million,
and in ACL by R30 million and the leasing assets in Safair by approximately R730
million.
We estimate that, at existing exchange rates, the annual depreciation charge to
the end of the lease term in SLF will be higher in terms of IFRS than in terms
of SA GAAP, but the need for future impairments would be far less, if any, and
in Safair, the annual depreciation charge will be lower in terms of IFRS. The
aforesaid difference between SLF and Safair is because of the relative age of
the aircraft.
These adjustments will have no cash flow effect.
LOGISTICS
The division achieved revenue growth of 10% to R12,7 billion and operating
profit increased by 16% to R698 million, with an outstanding performance by the
international logistics business.
SOUTHERN AFRICA
The past year was a challenging, but successful one for Imperial Logistics.
Whilst currency volatility, a sharply rising fuel price and industrial action
provided significant challenges, improved productivity, good domestic demand
levels and reasonable import activity were key positive factors. Revenue
improved by 11%, despite the impact of low inflation on contract escalations and
the effects of the ten-day truck drivers' strike in March. The strike action
cost the group about R25 million, although some of this was recouped through
improved productivity due to pent-up demand immediately after the strike.
Against this background, the division improved its operating profit by 7%.
Margins were also compressed by the significant impact of sharply rising fuel
prices, particularly in the second half of the year. While increases in fuel
costs are recovered, we are not able to make a margin on the higher cost of
fuel.
During the year, Imperial Logistics was successful in acquiring four bolt-on
businesses that complement the group's offering in key markets. These
acquisitions made a marginal initial contribution to profits and revenue.
EUROPE
Imperial Logistics International experienced a good year. Despite a continued
strong exchange rate against the Euro, rand-based revenue grew by 9%. Profits
from operations increased by 47% to R196 million, with margins improving to 3.1%
from 2.2%. In Euros revenue grew by 13% to Euro 812million (2004: Euro 719
million) and operating profit increased by 51% to Euro 24.8 million (2004: Euro
16.4 million). These improved profits resulted from efficiencies, cost
containment and fundamentally good performances across the board. The group
successfully disposed of its interest in JH Bachmann to DFDS Transport with
effect from 1 June 2005, excluding Megafreight in South Africa, which is an
important component of our Southern African service offering.
During the period, Imperial Logistics International acquired two complementary
businesses, adding expertise and new customers to two of our core operations. A
large logistics contract with a major original equipment manufacturer was also
renewed during the period for a further five years.
LEASINGANDFLEETMANAGEMENT
The market environment remained challenging during the year. Despite this, the
division recorded a 12% increase in fleet size. Revenue improved by 15% to R2,6
billion, driven both by volume growth and increased motor retailing activity in
Hypercar, the division's newly established used car chain. Profitability came
under pressure with operating profits declining by 11% to R469 million. This was
caused by new business that was added during the period which did not make a
profit contribution as yet. At the pre-tax level, lower interest rates resulted
in interest margin compression due to a portion of the group's capital market
debt funding having been raised at fixed rates. A significant provision has been
raised arising out of the non-payment by the National Prosecuting Authority
(NPA) of a substantial claim which Imperial has against it, recovery of which is
being pursued. Although the company and its legal advisors are of the view that
the claim will succeed, it is considered prudent to make a provision from an
accounting perspective in view of the NPA's failure to pay the amount claimed.
Our United Kingdom forklift operation disappointed, but we had an excellent
result from our South African operations. Hypercar came close to breakeven with
good volumes.
The division's contract with certain South African government departments
expired at end of May 2005. This contract has been extended on a short term
basis pending a tender process. We are hopeful of securing this contract for a
further term.
While used vehicle prices have come under pressure, we managed to realise
profits on the transfer and sale of vehicles, confirming our prudent
depreciation policies.
AVIATION LEASING
The past year was difficult for this business. While the fundamental trading
performance of the division was sound, the strong rand had a significant impact
on reported results. Revenue improved by 11% to R2.7 billion, but margins
contracted to 9% (2004: 10.8%) resulting in an 8% decline in operating profit.
Fleet utilisation and trading activity remained good. Certain leases terminated
during the period and these aircraft have successfully been placed with new
customers at current market rates which are lower than the expired leases. Sales
volumes also remained strong in the general aviation market where we sell both
new and used general aviation aircraft and helicopters. However, NAC posted poor
results, while Naturelink performed well. The group's Ireland based business,
Air Contractors experienced a tough second half as a result of start-up costs
associated with new contracts in the freight integrator market, which will
benefit the business going forward. Despite a sound operational performance
across this division, a significant exposure to US$ and Euro revenues amidst a
continued strong rand negatively impacted results.
CAR RENTAL AND TOURISM
The car rental and tourism businesses had a good year, which saw operating
profit increase by 14% to R495 million. While the inbound tourism market
continued to feel the effects of the strong rand, the car rental businesses were
buoyed by strong demand, particularly in the domestic tourism segment.
Excluding Tourvest, revenue improved by 5%, driven by strong volume growth in
the car rental businesses and a good performance by Auto Pedigree. The rental
market was highly competitive in most areas. Despite this, good utilisation
levels resulted in better efficiencies and together with a reduced depreciation
charge, operating margins improved from 15.6% last year to 17.9%. Divisional
revenue increased by 4% to R3,1 billion.
The car rental businesses experienced strong demand patterns in both the
corporate and local leisure markets. The growth experienced by the low cost
airline industry in South Africa has accelerated demand in the local leisure
market in particular. As the strength in demand was somewhat unexpected, we
experienced occasional fleet shortages. With further growth expected to
continue, we intend to increase our vehicle fleet for the coming year.
The tourism operations experienced relatively challenging trading conditions.
Tourist volumes and buying patterns were affected by the strength of the rand,
which has significantly impacted the affordability of South Africa as a
destination. Tourvest was similarly affected by these issues and experienced
pressure on revenue and profitability. Tourvest's revenues and its operating
profits increased by 3%, though its earnings per share were up by 81% largely
due to a high tax (STC) charge last year.
DISTRIBUTORSHIPS
The group's distribution interests had an outstanding year. Strong demand in the
passenger and commercial vehicle markets buoyed revenue by 54% to R9,7 billion.
In addition to the distribution of passenger cars and light commercial vehicles,
the divisions' performance was boosted by heavy truck and auto parts
distribution in Tyco and Lectrolite, as well as income from 76 car dealerships
and seven heavy truck outlets, through which 85% growth in new and used unit
sales were achieved over 2004.
Motor vehicle purchases by new emerging consumers was particularly evident in
the passenger market. While this trend was fuelled by favourable economic
conditions for the consumer, we believe that structural factors of a permanent
nature have caused a great deal of the increased demand. Good economic
conditions also supported growth in the commercial segments. Profitability grew
strongly, with margins increasing to 9.6% from 9.0%. This was supported by
improved economies of scale, more emphasis on maintenance, service plans,
extended warranties and financial services, which secured more back-end and
after-sales income streams.
The division was our largest profit contributor.
During the year, the group was appointed distributors of Tata passenger and
light commercial vehicles in partnership with Tata Motors and Ukhamba Holdings.
We also gained the distribution rights for Renault Trucks and Lotus sports cars.
Since the year-end we obtained the Proton distributorship from Petronas in
Malaysia.
DEALERSHIPS
The division experienced the benefit of an extremely buoyant new vehicle market.
However, despite the strong volume performance of the new vehicle segment,
margins remained under pressure. It acquired eight dealerships during the year,
including a DCSA outlet in the Limpopo province, and a BMW dealership in
Germiston in partnership with Ukhamba. It was also awarded five new franchises.
Revenue increased by 20% to R12.1 billion, driven mainly by volume growth as
pricing has remained static for about two and a half years. Operating profit
increased by 9.5% to R301 million. Margins declined to 2.5% from 2.7% due to the
impact of inflation on our overheads while nominal gross profits per unit were
weak, and due to a changing sales mix. The division again applied sound cash
flow management and achieved its goal of pre-capex cash flow exceeding its
profit.
The group (including sales by other divisions) retailed a total of 136 882
(2004: 93 422) vehicles during the year of which 45002 (2004: 36 771) were used
vehicles. While growth in used vehicle sales was marginally behind that of new
vehicles, improved capacity in the sale of used vehicles supports our goal of
selling one used vehicle for every new vehicle in time.
INSURANCE
The group's insurance businesses had a great year, buoyed by strong demand in
the automotive market. Strong equity markets provided an additional fillip by
boosting investment gains from R49 million last year to R190 million. Revenue
grew by 24% to R2 billion.
Supported by good underwriting conditions, Regent Insurance, our short term
insurer, achieved strong growth in its underwriting profit from R78 million last
year to R96 million where the claims experience was significantly better than
expected. In both Regent Life and Regent Insurance improved economies of scale
resulted in a reduction in unit costs. Pre-tax profits improved by 54% to R420
million. The life operation also saw good underwriting results, and we are now
taking on more risk while making less use of re-insurance in both operations.
This has enhanced profitability without impacting negatively on claims
experience.
The group acquired a 60% interest in Lesotho National Insurance Holdings during
the year and it operated successfully.
ASSOCIATES
The contribution made by associates declined marginally from R228 million in
2004 to R216 million. The principal effects on this result were:
- Safair Lease Finance's contribution declined mainly due to the strong
currency.
- Our share of Imperial Bank's profit declined from R108million to R91 million,
mainly due to a reduction in income from the assets bought from Saambou Bank, as
well as an increase in bad debts in the aviation finance division due to the
strong rand. The motor and property finance divisions performed well.
- Renault South Africa experienced good trading conditions with substantially
increased profits.
- The group disposed of its 33% interest in DAWN Limited to Ukhamba Holdings in
December 2004, effectively disposing of half of our interest.
- Ukhamba Holdings continues to develop into a very credible broad-based black
economic empowerment business.
SUCCESS OF IMPERIAL'S BROAD BASED EMPOWERMENT
Ukhamba, a 10.2% shareholder and the group's first empowerment initiative
representing 15000 historically disadvantaged employees of the Imperial group,
grew rapidly during the year. The first tranche of 1740001 deferred ordinary
shares will now be converted to ordinary shares, representing tangible wealth
enhancement for Ukhamba and its shareholders. The converted ordinary shares will
be listed on the JSE and now have a value in excess of some R200 million. This
is a unique achievement creating wealth for such a large number of historically
disadvantaged individuals in the first full year of the transaction. In
addition, the first dividend will be paid to Ukhamba shareholders in October
2005.
The group made significant progress during the year towards attaining its long
term empowerment goals. It has always been the view of the group that further
empowerment would be necessary in its transformation process. A further
empowerment transaction with Lereko Mobility was successfully implemented with
the overwhelming support of shareholders. Lereko Mobility became the owners of
approximately 7.25% of the company's ordinary shares in a transaction valued at
R1.4 billion.
The transformation efforts of Imperial were however, not concentrated solely on
equity but also extended to all other areas of the business from enhancing
representation at board level where previously disadvantaged groups now
represent 42% of the board, to areas such as BEE procurement, employment, social
development and training, which were given priority during the year. The group
is committed to transformation and empowerment and will continue to pursue and
enhance all facets of empowerment in its businesses.
JOBCREATIONANDINVESTMENT
The group employs 32 696 people worldwide, including 27640 in South Africa, and
added 3168 new jobs, of which 2254 were in South Africa. R47 million was spent
on training during the year with 725 000 total training hours. R2.2 billion was
invested in the future expansion of the group up from R1.3 billion last year.
OUTLOOK
The outlook for the group remains positive. It is expected that consumer
spending will remain relatively buoyant, which should be good, not only for our
vehicle interests, but for the wider group, through strength in the economy as a
whole. The current environment of low inflation, stable interest rates and a
relatively strong currency should be supportive of further growth for the group.
Our businesses are also well positioned to benefit from expected growth in
infrastructure spending and we have the funding capacity to take opportunities
as they arise.
Accordingly our focus remains on growing organically within our current business
mix, with a secondary priority on bolt-on acquisitive growth. We also expect a
solid performance from our businesses outside South Africa.
We anticipate good growth in earnings in the ensuing year, as measured on a like
for like basis in terms of accounting policies applied this year.
By order of the board
LBoyd, Chairman
W GLynch, Chief executive
A HMahomed, Financial director
Johannesburg
23 August 2005
CAPITAL DISTRIBUTION
ORDINARY SHAREHOLDERS
Notice is hereby given that a capital distribution of 220 cents per ordinary
share has been declared in terms of the general authority granted at the annual
general meeting of shareholders held on 2 November 2004 and is payable to
ordinary shareholders recorded in the registers of the company at the close of
business on Friday, 30 September 2005. In compliance with the requirements of
STRATE, the electronic settlement and custody system used by the JSE Limited,
the company has determined the following salient dates for the payment of the
capital distribution:
2005
Last day to trade cum capital
distribution Friday, 23 September
Shares commence trading ex
capital distribution Monday, 26 September
Record date Friday, 30 September
Payment date Monday, 3 October
Share certificates may not be dematerialised/rematerialised between Monday, 26
September 2005 and Friday, 30 September 2005, both days inclusive.
On Monday, 3 October 2005, the capital distribution will be electronically
transferred to the bank accounts of certificated shareholders that utilise this
facility. In respect of those who do not, cheques dated 3 October 2005 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, 3
October 2005.
In terms of the Exchange Control Regulations of the Republic of South Africa,
cash payments based on emigrant's shares controlled in terms of the Exchange
Control Regulations will be forwarded to an authorised dealer in foreign
exchange controlling their blocked assets, nominated in advance by such
emigrants.
PREFERRED ORDINARY SHAREHOLDERS
Notice is hereby further given that a capital distribution of 267.5 cents per
preferred ordinary share has been declared and is payable to preferred ordinary
shareholders recorded in the registers of the company at the close of business
on Thursday, 29 September 2005.
On Friday, 30 September 2005 the capital distribution will be electronically
transferred to the bank accounts of preferred ordinary shareholders.
On behalf of the board
R A Venter, Group Company Secretary
23 August 2005
INCOME STATEMENT 2005 2004 %
for the years ended 25 June Rm Rm change
Revenue 42 546 34 747 22
Profit from operations before
depreciation and recoupments 4 845 4 066
Depreciation and recoupments (1 322) (1 193)
Operating profit 3 523 2 873 23
Foreign exchange gains/(losses) 7 (30)
Fair value gains/(losses) to foreign
exchange derivatives 107 (82)
Goodwill amortisation - (63)
Profit before net financing costs 3 637 2 698 35
Finance costs including fair value
gains and losses on borrowings
and interest swaps (608) (529)
Finance income 22 51
Income from associates and joint
ventures 216 228
Profit before exceptional items 3 267 2 448 33
Exceptional items 261 (26)
Profit before taxation 3 528 2 422 46
Taxation 994 692
Profit after taxation 2 534 1 730 46
Minority interest 194 113
Net attributable profit for the year 2 340 1 617 45
Cents Cents
Earnings per share*
- Basic 1 168.1 797.5 46
- Diluted 1 095.7 748.9 46
Headline earnings per share*
- Basic 1 045.8 835.9 25
- Diluted 981.0 784.9 25
Earnings per share reconciliation*
Headline earnings per share 1 045.8 835.9
Goodwill amortisation (29.2)
Profit on sale of property, plant
and equipment 2.8 4.2
Exceptional items 119.5 (13.4)
Basic earnings per share 1 168.1 797.5
*Based on the weighted average number
of shares in issue for the year
Additional information
Net asset value per share (cents) 4 836 4 307
Number of shares (million)
- in issue 186 200
- weighted average 200 203
Financing costs Rm Rm
Interest paid 577 586
Capitalised to property, plant and
equipment (1) (2)
Fair value (gains)/losses on
borrowings and interest swaps 32 (55)
608 529
Exceptional items
Surplus on disposal of Imperial
Bank Limited 53
Impairment of property, plant
and equipment (41)
Loss on closure of business (16)
Impairment of goodwill (67) (33)
Reversal of impairment of other assets 3
Profit/(Loss) on sale of investments
in subsidiaries and associates and
joint ventures 344 (8)
261 (26)
ACCOUNTING POLICIES
The preliminary audited financial information is prepared in accordance with AC
127 on Interim Financial Reporting, and should be read in conjunction with the
2004 Annual Financial Statements. The accounting policies adopted are consistent
with those applied in the Annual Financial Statements for the year ended 25 June
2004 except for the changes detailed in notes 1, 2 and 3 below.
1. AC 140 - Business Combinations
During the current year the group adopted AC 140 - Business Combinations which
results in goodwill no longer being amortised but rather reviewed for
impairment. Negative goodwill of R17million has been credited to opening
retained earnings at 26 June 2004. As this is a prospective adjustment
comparatives have not been restated.
In 2005 the goodwill impairment was R67million and there was no amortisation. In
2004 goodwill of R33million was impaired and the amortisation charge was
R63million.
2. AC 105 - Leases
According to recent accounting developments operating lease expenses should be
charged to the income statement, on a straight-line basis unless another
systematic method is more representative of the time pattern of the user's
benefit. Previously operating leases were accounted for as an expense when
incurred.
As this is a retrosprective adjustment comparatives have been restated.
Accounts receivable and accounts payable have been restated. The after tax
effect to attributable profit in the current year is a reduction of R7million
(2004: R9million). Basic earnings per share has been restated from 802.3 cents
to 797.5 cents, and basic headline earnings per share has been restated from
840.5 cents to 835.9 cents.
3. Revenue classification
Tourvest Inbound Division
During the year, the Tourvest Inbound Division changed its definition of
revenue. In line with the practice in the industry revenue from Tourvest
Inbound Operations is now accounted for on a net commission basis, that is
commissions receivable. Previously, revenue was accounted for on gross amounts
billed to customers. Comparatives have been restated accordingly.
Financial services businesses investment income
Previously dividends and interest earned in the insurance businesses were
classified as revenue. In the current year this classification has been changed
to include it in investment income as part of operating profit.
The above revenue classification changes had no other effect on the income
statement or balance sheet other than the calculation of revenue as noted below:
2005 2004
Rm Rm
As stated before the restatement 43 012 35 278
Less:
- Revenue from Tourvest Inbound
operations now accounted for on a
net commission basis 383 454
- Financial services investment income 83 77
42 546 34 747
AUDIT REPORT
The comprehenisive results have been audited by the group's auditors Deloitte &
Touche. Their unqualified audit opinion is available for inspection at the
company's registered office.
BALANCE SHEET 2005 2004
at 25 June Rm Rm
Property, plant and equipment 2 760 2 311
Intangible assets 622 488
Investments in associates and joint ventures 1 917 1 770
Other investments and loans 1 284 890
Deferred tax assets 280 275
Leasing assets 5 818 4 785
Transport fleet 2 397 2 150
Vehicles for hire 790 734
Inventories 5 695 3 729
Trade and other receivables 6 164 4 769
Taxation in advance 128 98
Cash and cash equivalents 1 043 1 261
Total assets 28 898 23 260
Insurance funds 978 833
Interest-bearing borrowings 7 562 6 576
Retirement benefit obligations 162 178
Deferred tax liabilities 885 630
Treasury stock buy back liability* 1 438
Other liabilities 8 419 5 983
Total liabilities 19 444 14 200
Net assets 9 454 9 060
FUNDED BY
Ordinary shareholders' interest 8 991 8 618
Minority interest 463 442
Total shareholders' equity 9 454 9 060
Supplementary information
Investments in associates and joint ventures
At carrying value 1 013 796
Loans 904 974
1 917 1 770
Other investments and loans
Listed, at market value 1 121 698
Unlisted, at fair value 91 62
Loans receivable 72 130
1 284 890
Capital expenditure 4 627 3 834
Capital commitments 658 328
Contingent liabilities 507 301
Lease commitments 1 901 1 331
*The Group entered into a scheme of arrangement in terms of section 311 of the
Companies Act whereby its wholly owned subsidiary, Imperial Corporate Services
("ICS") repurchased 7.25 of every 100 ordinary shares held by shareholders at a
price of R96.85 per share ("the Scheme of Arrangement"). The scheme of
arrangement was approved by shareholders on 6 June 2005 and sanctioned by the
High Court on 14 June 2005, on which day it became binding on all the parties
thereto. The financial effects of the scheme of arrangement were consequently
accrued in this financial year although settlement only took place on 27 June
2005, after the financial year end.
This amount was settled from the proceeds received from Lereko Mobility on the
issue of 8319323 preferred ordinary shares at R96.85 and 6197294 preferred
ordinary shares at their par value of 4 cents.
CASH FLOW STATEMENT 2005 2004
for the year ended 25 June Rm Rm
Cash flows from operating activities
Cash generated by operations before changes in
working capital 4 841 4 317
Net working capital movements (473) (31)
Cash generated by operations 4 368 4 286
Net financing costs (554) (533)
3 814 3 753
Taxation paid (565) (614)
Net cash flows from operating activities 3 249 3 139
Cash flows from investing activities
Acquisition of subsidiaries and businesses (286) (156)
Proceeds on disposal of subsidiaries and
businesses 290 60
Expansion of property, plant and equipment (373) (403)
Expansion of leasing assets (1 125) (548)
Expansion of transport fleet (330) (219)
Expansion of vehicles for hire (53) -
Net replacement of property, plant and equipment (193) (88)
Net replacement of leasing assets (476) (168)
Net replacement of transport fleet (142) (298)
Net replacement of vehicles for hire (104) (138)
Net acquisition of intangibles (20) (10)
Additional investments in and loans to
subsidiaries and associated companies, net
of disposals 116 (313)
Purchase of equities and loans advanced (601) (680)
Proceeds on disposal of investments 417 552
Net cash flows from investing activities (2 880) (2 409)
Cash flows from financing activities
Cash flow from the issue of shares and
movements in minorities 61 57
Purchase of treasury stock (70) (307)
Dividends paid (66) (427)
Capital distribution (699) (283)
(Decrease)/increase in long-term borrowings (662) 519
Net cash flows from financing activities (1 436) (441)
Net (decrease)/increase in cash and cash
equivalents (1 067) 289
STATEMENT OF CHANGES IN EQUITY
for the year ended 25 June
Share Non- Distri-
capital distributable butable
and premium reserve reserve Total
Rm Rm Rm Rm
Balance at 26 June 2003 2 205 403 5 591 8 199
Opening distributable
reserves adjustment
resulting from AC133 (146) (146)
Balance at 26 June 2003
inclusive of 2004
prospective adjustment 2 205 403 5 445 8 053
Opening distributable
reserves adjustment
resulting from AC105 (1) (34) (35)
Net losses arising on
translation of foreign
operations not recognised
in the income statement (222) (222)
Net attributable profit
for the year 1 617 1 617
Share of distributable
reserves of associates
and joint ventures 177 (177) -
Contingency reserve 23 (23) -
Realised gains on sale
of subsidiaries (4) 4 -
Revaluation of available
for sale investments to
fair value 4 4
Issue of 22 755 389
deferred ordinary shares 1 1
Issue of 1 901 401
ordinary shares 74 74
Purchase of 4 676 582
ordinary shares (307) (307)
Ordinary dividend of
140 cents per share net
treasury stock in
September 2003 (284) (284)
Capital distribution of
140 cents per share in
March 2004 (283) (283)
Balance at 25 June 2004 1 690 380 6 548 8 618
Opening distributable
reserves adjustment
resulting from AC140 17 17
Net gains arising on
translation of foreign
operations not recognised
in the income statement 83 83
Net attributable profit
for the year 2 340 2 340
Share of distributable
reserves of associates
and joint ventures 175 (175) -
Contingency reserve 29 (29) -
Cancellation of
14 532 422 treasury
shares 626 (626) -
Purchase of 14 533 096
ordinary shares in terms
of scheme of arrangement (1 438) (1 438)
Hedge accounting reserve 80 80
Issue of 1 268 400
ordinary shares 60 60
Purchase of 911 169
ordinary shares (70) (70)
Capital distribution of
175 cents per share in
October 2004 (349) (349)
Capital distribution of
175 cents per share in
March 2005 (350) (350)
Balance at 25 June 2005 169 747 8 075 8 991
SEGMENTAL INFORMATION
25 June 2005
INCOMESTATEMENT
Leasing
and fleet
Group Logistics management
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
Business segmentation
Revenue
- Sales of goods 22 657 17 125 626 589 543 470
- Rendering of services 18 122 16 080 11 676 10 523 1 712 1 511
- Gross premiums
received 1 709 1 491
- Other 58 51 58 51 1
42 546 34 747 12 360 11 163 2 255 1 981
Inter-segment revenue 361 413 314 259
42 546 34 747 12 721 11 576 2 569 2 240
Operating expenses
excluding gains and
losses on investments 37 974 30 807 11 592 10 566 1 570 1 284
Investment income (83) (77)
Fair value gains
investments (190) (49)
Depreciation 1 539 1 495 500 464 572 490
Recoupments (217) (302) (69) (54) (42) (59)
Operating profit 3 523 2 873 698 600 469 525
Foreign exchange gains
(losses) 7 (30) 3 (16) (11) (12)
Fair value gains (losses)
on foreign exchange
derivatives 107 (82) 1 4 (8)
Goodwill amortisation (63) (30) (2)
Profit before net
financing costs 3 637 2 698 702 554 462 503
Net financing costs (586) (478) (92) (105) (165) (156)
Income from associates
and joint ventures 216 228 11 18 (1)
Profit before
exceptional items 3 267 2 448 621 467 296 347
Geographic segmentation
Revenue 42 546 34 747 12 721 11 576 2 569 2 240
- South Africa 33 615 27 165 6 116 5 267 2 131 1 832
- Rest of Africa 726 889 182 393 180 185
- Rest of World 8 205 6 693 6 423 5 916 258 223
Operating profit 3 523 2 873 698 600 469 525
- South Africa 3 208 2 565 491 444 401 433
- Rest of Africa 105 135 11 23 45 69
- Rest of world 210 173 196 133 23 23
Net financing costs 586 478 92 105 165 156
- South Africa 553 444 85 94 144 134
- Rest of Africa 15 19 3 6 11 12
- Rest of world 18 15 4 5 10 10
BALANCE SHEET
Business segmentation
ASSETS
Property, plant and
equipment 2 760 2 311 1 050 969 114 93
Intangible assets
(including Goodwill) 622 488 256 226 4 15
Investments loans and
associates 2 225 1 956 1 100
Leasing assets 5 818 4 785 3 119 2 468
Transport fleet 2 397 2 150 2 461 2 208
Vehicles for hire 790 734
Inventories 5 695 3 729 154 182 310 292
Trade and other
receivables 6 164 4 769 2 990 2 544 338 341
Cash in financial
services businesses 454 473
Operating assets 26 925 21 395 6 912 6 229 3 885 3 209
Deferred tax assets 280 275
Loans to associates and
other investments 976 704
Taxation in advance 128 98
Cash and cash
equivalents 589 788
Total assets per
balance sheet 28 898 23 260
LIABILITIES
Insurance funds 978 833
Retirement benefit
obligations 162 178 162 178
Accounts payable and
provisions 7 783 5 561 2 432 2 349 540 457
Non-interest-bearing
liabilities 8 923 6 572 2 594 2 527 540 457
Interest-bearing
borrowings 7 562 6 576
Treasury stock buy back
liability 1 438
Deferred tax liabilities 885 630
Current tax liabilities 636 422
Total liabilities per
balance sheet 19 444 14 200
Geographic segmentation
Operating assets 26 925 21 395 6 912 6 229 3 885 3 209
- South Africa 22 758 17 912 4 758 4 366 3 115 2 543
- Rest of Africa 566 552 122 213 269 190
- Rest of world 3 601 2 931 2 032 1 650 501 476
Non-interest-bearing
liabilities 8 923 6 572 2 594 2 527 540 457
- South Africa 7 591 5 390 1 713 1 572 439 353
- Rest of Africa 185 213 29 62 54 45
- Rest of world 1 147 969 852 893 47 59
Interest bearing
borrowings 7 562 6 576 1 420 1 529 2 266 1 767
- South Africa 6 867 5 835 1 261 1 302 2 254 1 513
- Rest of Africa (3) 217 8 69 90
- Rest of world 698 524 151 158 12 164
Gross capital
expenditure 4 627 3 834 907 895 1 612 1 372
- South Africa 4 182 3 292 784 699 1 347 1 190
- Rest of Africa 201 126 39 55 148 60
- Rest of world 244 416 84 141 117 122
Gross capital
expenditure 4 627 3 834 907 895 1 612 1 372
Less: Proceeds on
disposal (1 813) (1 962) (303) (224) (450) (597)
Net capital expenditure 2 814 1 872 604 671 1 162 775
SEGMENTAL INFORMATION
25 June 2005
INCOME STATEMENT
Car rental
Aviation and Distributor-
leasing tourism ships
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
Business segmentation
Revenue
- Sales of goods 769 748 1 323 1 252 8 603 5 025
- Rendering of services 1 878 1 694 1 586 1 515 607 342
- Gross premiums
received
- Other 1 (1)
2 648 2 442 2 909 2 767 9 209 5 367
Inter-segment revenue 51 160 185 446 918
2 699 2 442 3 069 2 952 9 655 6 285
Operating expenses
excluding gains and
losses on investments 2 328 2 080 2 419 2 321 8 666 5 674
Investment income
Fair value gains
investments
Depreciation 181 173 205 295 62 50
Recoupments (53) (74) (50) (97) (1) (5)
Operating profit 243 263 495 433 928 566
Foreign exchange
gains (losses) 10 (9) 2 4 7
Fair value gains (losses)
on foreign exchange
derivatives 2 101 (74)
Goodwill amortisation (25) (3)
Profit before net
financing costs 255 254 497 408 1 033 496
Net financing costs (152) (125) (27) (38) (43) (83)
Income from associates
and joint ventures 53 71 1 1 49 24
Profit before
exceptional items 156 200 471 371 1 039 437
Geographic segmentation
Revenue 2 699 2 442 3 069 2 952 9 655 6 285
- South Africa 1 972 1 888 2 821 2 852 8 695 6 199
- Rest of Africa 152 100 162 86
- Rest of World 727 554 96 798
Operating profit 243 263 495 433 928 566
- South Africa 240 245 485 421 943 568
- Rest of Africa 10 12 (4) (2)
- Rest of world 3 18 (11)
Net financing costs 152 125 27 38 43 83
- South Africa 153 123 30 42 33 81
- Rest of Africa (2) (2) 3 2
- Rest of world (1) 2 (1) (2) 7
BALANCE SHEET
Business segmentation
ASSETS
Property, plant and
equipment 128 107 181 181 639 459
Intangible assets
(including Goodwill) 77 21 231 231 33
Investments, loans
and associates 774 506 2 1 168 254
Leasing assets 2 479 2 185 227 139
Transport fleet
Vehicles for hire 793 740
Inventories 676 501 365 335 2 973 1 346
Trade and other
receivables 325 476 297 250 1 171 600
Cash in financial
services businesses
Operating assets 4 459 3 796 1 869 1 738 5 211 2 798
Deferred tax assets
Loans to associates and
other investments
Taxation in advance
Cash and cash
equivalents
Total assets per
balance sheet
LIABILITIES
Insurance funds
Retirement benefit
obligations
Accounts payable and
provisions 513 404 501 461 2 380 1 082
Non-interest-bearing
liabilities 513 404 501 461 2 380 1 082
Interest-bearing
borrowings
Treasury stock buy
back liability
Deferred tax liabilities
Current tax liabilities
Total liabilities per
balance sheet
Geographic segmentation
Operating assets 4 459 3 796 1 869 1 738 5 211 2 798
- South Africa 4 093 3 454 1 847 1 712 4 454 2 763
- Rest of Africa 22 26 57 35
- Rest of world 366 342 700
Non-interest-bearing
liabilities 513 404 501 461 2 380 1 082
- South Africa 383 388 454 449 2 243 1 066
- Rest of Africa 22 12 21 16
- Rest of world 130 16 25 116
Interest bearing
borrowings 2 328 1 967 163 311 978 434
- South Africa 2 275 1 765 162 270 495 405
- Rest of Africa 1 41 29
- Rest of world 53 202 483
Gross capital
expenditure 463 207 867 825 579 392
- South Africa 421 53 856 814 575 392
- Rest of Africa 11 11 3
- Rest of world 42 154 1
Gross capital
expenditure 463 207 867 825 579 392
Less: Proceeds on
disposal (77) (142) (659) (620) (283) (334)
Net capital expenditure 386 65 208 205 296 58
SEGMENTAL INFORMATION
25 June 2005
INCOME STATEMENT
Motor Head office
vehicle Insurance and
dealerships eliminations
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
Business segmentation
Revenue
- Sales of goods 10 793 9 041
- Rendering of services 550 463 20 8 93 24
- Gross premiums
received 1 709 1 491
- Other 1 (1)
11 343 9 504 1 729 1 500 93 23
Inter-segment revenue 730 586 298 131 (2 360)(2 492)
12 073 10 090 2 027 1 631 (2 267)(2 469)
Operating expenses
excluding gains and
losses on investments 11 739 9 788 1 873 1 475 (2 213)(2 381)
Investment income (83) (77)
Fair value gains
investments (190) (49)
Depreciation 34 32 9 9 (24) (18)
Recoupments (1) (5) (1) (1) (7)
Operating profit 301 275 419 274 (30) (63)
Foreign exchange
gains (losses) (1)
Fair value gains (losses)
on foreign exchange
derivatives (1)
Goodwill amortisation (1) (1) (1)
Profit before net
financing costs 301 274 419 273 (32) (64)
Net financing costs (31) (31) 1 (77) 60
Income from associates
and joint ventures 2 1 101 113
Profit before
exceptional items 272 244 420 273 (8) 109
Geographic segmentation
Revenue 12 073 10 090 2 027 1 631 (2 267)(2 469)
- South Africa 12 073 10 090 1 902 1 506 (2 095)(2 469)
- Rest of Africa 125 125 (75)
- Rest of World (97)
Operating profit 301 275 419 274 (30) (63)
- South Africa 301 275 374 242 (27) (63)
- Rest of Africa 45 32 (2) 1
- Rest of world (1) (1)
Net financing costs 31 31 (1) 77 (60)
- South Africa 31 31 (1) 78 (61)
- Rest of Africa 1
- Rest of world (1)
BALANCE SHEET
Business segmentation
ASSETS
Property, plant and
equipment 451 323 91 83 106 96
Intangible assets
(including Goodwill) 15 (2) 6 5 (8)
Investments, loans and
associates 8 9 1 336 870 (64) 216
Leasing assets (7) (7)
Transport fleet (64) (58)
Vehicles for hire (3) (6)
Inventories 1 368 1 074 (151) (1)
Trade and other
receivables 478 387 664 626 (99) (455)
Cash in financial
services businesses 454 473
Operating assets 2 320 1 791 2 551 2 057 (282) (223)
Deferred tax assets
Loans to associates
and other investments
Taxation in advance
Cash and cash
equivalents
Total assets per
balance sheet
LIABILITIES
Insurance funds 978 833
Retirement benefit
obligations
Accounts payable
and provisions 1 050 709 616 514 (249) (415)
Non-interest-bearing
liabilities 1 050 709 1 594 1 347 (249) (415)
Interest-bearing
borrowings
Treasury stock buy
back liability
Deferred tax liabilities
Current tax liabilities
Total liabilities per
balance sheet
Geographic segmentation
Operating assets 2 320 1 791 2 551 2 057 (282) (223)
- South Africa 2 320 1 791 2 383 1 907 (212) (624)
- Rest of Africa 168 150 (72) (62)
- Rest of World 2 463
Non-interest-bearing
liabilities 1 050 709 1 594 1 347 (249) (415)
- South Africa 1 050 709 1 519 1 268 (210) (415)
- Rest of Africa 75 79 (16) (1)
- Rest of world (23) 1
Interest bearing
borrowings 121 19 14 286 535
- South Africa 121 19 14 299 547
- Rest of Africa (12) (12)
- Rest of world (1)
Gross capital
expenditure 195 95 17 21 (13) 27
- South Africa 195 95 17 21 (13) 28
- Rest of Africa
- Rest of world (1)
Gross capital
expenditure 195 95 17 21 (13) 27
Less: Proceeds on
disposal (35) (25) (3) (7) (3) (13)
Net capital expenditure 160 70 14 14 (16) 14
NON-EXECUTIVE DIRECTORS
L Boyd (Chairman), E Molobi (Deputy Chairman), PL Erasmus, P Langeni, MJ
Leeming, JR McAlpine, VJ Mokoena, PS Molefe, MV Moosa, M Sisulu, A Tugendhaft,
Y Waja
EXECUTIVE DIRECTORS
WG Lynch (Irish), RJ Boettger, MP de Canha, RL Hiemstra, AH Mahomed, GW Riemann
(German), CE Scott
SECRETARY
R A 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
This announcement is available on the Imperial Holdings website at
http://www.imperial.co.za and on SENS
Date: 24/08/2005 08:01:23 AM Produced by the JSE SENS Department
