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IPL
IPL
Imperial Holdings Limited - Unaudited interim results for the half
year ended 25 December 2005 and Capital Distribution
IMPERIAL HOLDINGS LIMITED
(Registration number 1946/021048/06)
Share code: IPL
ISIN CODE: ZAE000067211
Unaudited interim results for the half year ended 25 December 2005 and
Capital Distribution
- Headline earnings per share up 34% to 617 cents
- Revenue up 27% to R26.2 billion
- Distribution to shareholders up 31% to 230 cents
INCOME STATEMENT
Half year ended 25 December
Restated
Unaudited Restated Year ended
December December June
2005 2004 % 2005
Rm Rm change Rm
Revenue 26 172 20 653 27 42 546
Net operating expenses (23 224) (18 271) (37 771)
Profit from operations
before depreciation and
recoupments 2 948 2 382 24 4 775
Depreciation and
recoupments (816) (629) (1 381)
Operating profit 2 132 1 753 22 3 394
Foreign exchange
gains/(losses) 34 (16) 7
Fair value (losses)/
gains to foreign
exchange derivatives (53) (71) 107
Fair value loss on
embedded financial
instrument (Lereko
Mobility) (83)
Profit before net
financing costs 2 030 1 666 22 3 508
Finance costs net of
fair value gains
and losses (432) (348) (647)
Finance income 80 39 61
Income from associates
and joint ventures 170 74 186
Profit before
exceptional items 1 848 1 431 29 3 108
Exceptional items 21 258
Profit before taxation 1 848 1 452 27 3 366
Taxation 573 424 989
Profit after taxation 1 275 1 028 24 2 377
Minority interest 118 89 193
Net attributable profit
for the year 1 157 939 23 2 184
Earnings per share (cents)
Basic* 618.3 469.5 32 1 089.8
Diluted# 579.6 440.3 32 1 022.2
Headline earnings per
share (cents)
Basic* 616.9 460.0 34 968.8
Diluted# 578.2 431.4 34 908.8
Basic earnings per share
reconciliation (cents)*
Headline basic earnings
per share 616.9 460.0 968.8
Profit on sale of
property, plant
and equipment 1.4 8.0 2.6
Exceptional items 1.5 118.4
Basic earnings per
share 618.3 469.5 1 089.8
*Based on the weighted average
number of shares in issue.
#Based on the weighted average
umber of shares in issue, as
adjusted for the dilutive effect of
unissued shares as outlined below.
The Lereko transaction has been
excluded as it has an anti-dilutive
effect.
Number of shares net of treasury
stock (million)
- in issue 188.0 200.0 185.9
- weighted average 187.1 200.2 200.4
- adjusted for share
options and deferred
ordinary shares 12.5 13.3 13.2
- weighted average
number of ordinary
shares for diluted
earnings 199.6 213.5 213.6
Net asset value per
share (cents) 4 432.4 4 070.0 4 244.2
Additional information
Net financing costs 352 309 586
Finance costs 444 292 679
Fair value (loss)/gain
to interest-bearing
borrowings and interest
rate swap instruments (12) 56 (32)
Finance cost net of fair
value gains and losses 432 348 647
Finance income 80 39 61
Exceptional items 21 258
Loss on closure of
business (16)
Impairment of goodwill (9) (67)
Profit on sale of
investments in
subsidiaries, associates
and joint ventures 30 341
FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS)
These interim financial statements have been prepared in accordance
with IAS 34 - Interim Financial Reporting, and with IFRS 1 - First-
time Adoption of IFRS. Imperial"s date of transition to IFRS is 25
June 2004. At this date the group prepared its opening balance sheet
under IFRS. IFRS has been applied consistently to all periods
presented on a retrospective basis, except for certain exceptions and
exemptions, as prescribed by IFRS1.
Please refer to the 25 June 2005 Annual Report pages 52 to 57 for the
initial overview of the impact, and the reconciliations contained in
this report, for an analysis of how the transition to IFRS affected
equity, the balance sheet and attributable profits of the group.
Except for minor re-classifications between working capital movements
and leasing assets in line with IFRS balance sheet reclassifications,
Imperial"s cash flow is unaffected by IFRS.
OTHER RESTATEMENTS
The following restatements originated during the second half of the
financial year ended 25 June 2005, for which prior period results were
restated in the Annual Report. The published interim results for
December 2004 have now also been restated accordingly.
AC 105 - STRAIGHT-LINING OF OPERATING LEASES
The impact on opening retained earnings is a reduction of R44 million
and the attributable profits for the 6 months to 25 December 2004 have
been reduced by R3 million.
REVENUE CLASSIFICATION
Revenue for the six months ended 25 December 2004 has been reduced by
R247 million due to reclassifications.
BALANCE SHEET
At 25 December
Unaudited Restated Restated
December December June
2005 2004 2005
Rm Rm Rm
Property, plant and equipment 3 194 2 436 2 781
Intangible assets 728 539 622
Investments in associates and
joint ventures 1 599 1 286 1 415
Other investments and loans 2 071 1 092 1 284
Deferred taxation 365 313 339
Leasing assets 5 771 4 375 5 074
Transport fleet 2 655 2 396 2 449
Vehicles for hire 1 162 972 790
Inventories 5 932 4 076 5 586
Trade and other receivables 7 658 6 038 6 164
Taxation in advance 89 105 128
Cash resources 1 248 1 007 1 043
Total assets 32 472 24 635 27 675
Insurance funds 1 148 796 978
Equity settled interest-
bearing borrowings 771
Interest-bearing borrowings 10 362 7 359 7 562
Retirement benefit
obligations 178 213 190
Deferred tax liabilities 873 398 636
Other liabilities 10 190 7 213 9 953
Total liabilities 23 522 15 979 19 319
Net assets 8 950 8 656 8 356
FUNDED BY
Ordinary shareholders"
interest 8 333 8 140 7 890
Minority interest 617 516 466
Total shareholders" equity 8 950 8 656 8 356
Supplementary information
Contingent liabilities 495 310 507
Capital commitments 596 369 658
ABRIDGED CASH FLOW STATEMENT
Half year ended 25 December
Restated
Unaudited Restated Year ended
December December June
2005 2004 % 2005
Rm Rm change Rm
Cash flows from
operating activities
- Cash generated by
operations before
changes in working
capital 2 999 2 380 4 841
- Working capital
movements (1 140) (843) (456)
Cash generated by
operations 1 859 1 537 21 4 385
- Net financing costs (364) (252) (554)
- Taxation paid (20) (231) (565)
1 475 1 054 40 3 266
Cash flows from investing
activities
- Net acquisitions and
disposals of
subsidiaries and
businesses (120) (52) 4
- Expansion capital
expenditure (1 328) (1 094) (1 881)
- Net replacement
capital expenditure (782) (468) (952)
- Investments, equities
and loans to
associates (460) (11) (68)
(2 690) (1 625) (2 897)
Cash flows from
financing activities
Cash flows from
financing activities (12) (119) (671)
Dividends paid (55) (35) (66)
Capital distribution (413) (348) (699)
(480) (502) (1 436)
Net decrease in cash
and cash equivalents (1 695) (1 073) (1 067)
Cash and cash
equivalents at
beginning of period (2 342) (1 275) (1 275)
Cash and cash
equivalents at end
of period (4 037) (2 348) (2 342)
RECONCILIATION OF EQUITY UNDER SA GAAP TO IFRS
Half year ended 25 December
December June June
2004 2005 2004
Rm Rm Rm
Total equity under SA GAAP
Stated originally 9 760 9 454 9 104
Restatements during 2005 (47) (27)
Published in June 2005
financial statements 9 713 9 454 9 077
Adjusted for the IFRS effect of:
IAS 16 - Property, plant and
equipment (925) (961) (925)
IAS 17 - Leases (68) (78) (65)
IAS 18 - Revenue (46) (43) (30)
IAS 19 - Employee benefits (19) (19) (20)
Minority interest in above 1 3 4
Total equity under IFRS 8 656 8 356 8 041
STATEMENT OF CHANGES IN EQUITY
Half year ended 25 December
Share capital,
premium and Non-
restricted Treasury distributable Retained
shares stock reserve earnings
Rm Rm Rm Rm
Balance at 25 June
- restated for
IFRS 2 026 (1 760) 380 7 244
Translation of
foreign operations
not recognised in
the income
statement (140)
Net attributable
profit for the
period 1 157
Prospective
adjustment to
minorities
Minorities" share
of atttributable
profits
Net acquisition/
(disposal) of
minorities
Share of non-
distributable and
distributable
reserves of
associates and
joint ventures 134 (134)
Revaluation of
available for sale
investments to
fair value
Contingency reserve
created in terms
of the Insurance
Act 20 (20)
Hedge accounting
reserve (181)
Capital
distributions (495) 82
Minority share of
dividends
Purchase of
ordinary shares
Issue of ordinary
shares in terms of
the share option
scheme 20
Issue of preferred
ordinary shares 806 (806)
Share-based payment
equity arising
from empowerment
transaction
Balance at
25 December 2 357 (2 484) 213 8 247
STATEMENT OF CHANGES IN EQUITY
Half year ended 25 December
Unaudited Restated
December Restated Year ended
Minority Total December June
interest 2005 2004 2005
Rm Rm Rm Rm
Balance at 25 June
- restated for
IFRS 466 8 356 8 041 8 041
Translation of
foreign operations
not recognised in
the income
statement (3) (143) (18) 87
Net attributable
profit for the
period 1 157 939 2 184
Prospective
adjustment to
minorities (1) (1)
Minorities" share
of atttributable
profits 118 118 89 193
Net acquisition/
(disposal) of
minorities 92 92 18 (111)
Share of non-
distributable and
distributable
reserves of
associates and
joint ventures
Revaluation of
available for sale
investments to
fair value 1
Contingency reserve
created in terms
of the Insurance
Act
Hedge accounting
reserve (181) 80
Capital
distributions (413) (348) (699)
Minority share of
dividends (55) (55) (35) (66)
Purchase of
ordinary shares (70) (1 508)
Issue of ordinary
shares in terms
of the share option
scheme 20 60
Issue of preferred
ordinary shares 39
Share-based payment
equity arising
from empowerment
transaction 95
Balance at
25 December 617 8 950 8 656 8 356
RECONCILIATION OF BALANCE SHEET UNDER SA GAAP TO IFRS
December June
2004 2005
Rm Rm
Total assets
As previously reported under SA GAAP 25 777 28 898
Adjusted as follows:
Property, plant and equipment 20 21
Investments in associates and joint
ventures (476) (502)
Deferred taxation 85 59
Leasing assets (775) (744)
Transport fleet 79 52
Inventories (92) (109)
Trade and other receivables 17
Stated under IFRS 24 635 27 675
Total liabilities
As previously reported under SA GAAP 16 017 19 444
Adjusted as follows:
Retirement benefit obligations 35 28
Deferred tax liabilities (190) (190)
Other liabilities 117 37
Stated under IFRS 15 979 19 319
RECONCILIATION OF PROFIT UNDER SA GAAP TO IFRS
December June
2004 2005
Rm Rm
Net attributable profit
As previously reported under SA GAAP 960 2 340
Adjusted as follows:
Operating expenses (16) (70)
Depreciation and recoupments (12) (59)
Income from associates and joint ventures (3) (30)
Exceptional items (3)
Taxation 9 5
Minority interest 1 1
Stated under IFRS 939 2 184
INTRODUCTION
We had an excellent first half to our 2006 financial year in revenue
and profit terms, further strengthening our base for long term
earnings growth.
Headline earnings per share were 34% up on last year (as restated),
reflecting a strong performance by our consumer facing vehicle
operations, and supported by a solid performance throughout the group.
This was achieved against favourable, but highly competitive trading
conditions in most of our markets.
Consumer demand during the period remained strong, led by a
continuation of high growth in motor vehicle sales, even from a high
base. Affordability of vehicles has improved markedly over the past
two to three years as job opportunities and disposable incomes
increased, interest rates declined and car prices remained static.
Imperial"s operating income from vehicle sales and related financial
services represents 55% of the group"s total, compared to 47% last
year. The markets in which the remainder of the group trades are more
corporate in nature, and also experienced good trading conditions,
although less buoyant than the direct consumer driven divisions.
In the six months to December 2005, the group retailed 63 365 (2004:
38 828) new and 29 526 (2004: 22 069) used passenger and commercial
vehicles. These sales show growth of 63% and 34% respectively. Sales
were boosted by market share growth locally and the inclusion of our
Australian Ford dealerships and Swedish Nissan dealerships for the
first time. The South African vehicle market grew by 25% year on year
in the six month period under review. Black consumers have contributed
strongly to vehicle sales growth, having become a significant
participant in this market.
While the group has a significant exposure to the anticipated growth
in infrastructure spending through its transport and logistics
activities, the acquisition of the MCC group in December introduced us
to the market for earth moving equipment used in heavy construction,
road building and open cast mining. MCC is South Africa"s largest
owner and operator of this type of equipment. This adds a new asset
class to the group"s activities of trading, distribution, rental,
operating, financing, leasing and insurance of passenger cars, light
to heavy commercial vehicles, forklifts and aircraft.
New initiatives, expansions and acquisitions have boosted the group"s
growth ambitions. In addition to MCC, the following acquisitions were
made:
- In the Logistics division, TFD Network Africa, a warehousing and
distribution business, as well as the assets of Bulktrans.
- In Imperial Logistics International, Gillhuber in Bavaria, Germany,
which is engaged in auto logistics.
- Iveco Natal, operating out of Pinetown
- Four Nissan dealerships in Sweden.
- In Tourvest, three businesses were acquired, which are engaged in
game drives and leisure activities in Botswana and Zambia, and
effective from January, Cummings Travel, a travel agency in South
Africa,.
- Lastly, after the half year end, it was announced that Imperial has
acquired, subject to certain conditions, a group of companies in the
United Kingdom from RAC plc for a total consideration of approximately
50 million on a debt free basis. The businesses include Lex
Commercials, a dealer in DAF trucks and LDV vans, operating 22
dealerships and workshops, Lex Auto Logistics, based near Manchester,
engaged in auto parts warehousing and distribution, Lex Fleetserve, a
niche logistics service provider of supply chain services to selected
user groups, and Lex Multipart Defence, a provider of outsourcing and
warehousing services to the UK defence sector. The group had a
combined turnover of approximately 300 million in its year to
December 2005, and employs 1 340 people.
As grassroots ventures, Associated Motor Holdings in the
Distributorships division opened six dealerships at various locations
around the country. It was further awarded the Zohgwen franchise, with
a competitively priced Chinese motor cycle, and it opened its first
Kawasaki retail outlet. Auto Pedigree in the Car Rental and Tourism
division opened five used car dealerships in the period, bringing to
12 the number opened in the 2005 calendar year. Two Honda dealerships,
at Zambezi Drive and in Northcliff, were opened in the Dealerships
division, as well as a Nissan Truck dealership in Midrand.
The group invested R311 million in real estate in the period, bringing
our total investment in well located commercial, industrial and office
properties to R2.2 billion.
The value of the group"s insurance investments amounts to R1 642
million, of which R1423 million is in listed South African and off-
shore equities and bonds.
In total, Imperial"s capital expenditure, net of recoupments, for the
six month period amounted to R2 110 million, of which R1 328 million
was for expansion.
FINANCIAL RESULTS
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
The group now presents its first set of interim results under IFRS.
The financial information has been prepared on the basis of the
current interpretation of the IFRS statements. In preparation for the
IFRS exercise, the group consulted with its auditors on the principles
involved, but the numbers have not been audited.
In the Sens announcement dated 23 August 2005 we detailed the major
IFRS adjustments and gave an initial estimate of the impact. The
computations have now been finalised and the reduction in the opening
equity for June 2004 is R1 040 million as detailed in the
reconciliation of equity. The reduction in attributable profit for the
year to June 2005 is R156 million of which R95 million is a once off
charge relating to the Lereko empowerment transaction. The net impact
on equity for the year to June 2005 is R61 million as the R95million
for the Lereko transaction is credited to equity being a share based
payment.
The IFRS impact on the interim results to December 2004 is a reduction
in attributable profit of R18 million. There was a further R3 million
adjustment to attributable profit restating operating lease costs on a
straight line basis.
In summary, therefore, the impact on earnings per share and headline
earnings per share for the prior interim period and the full year to
25 June 2005 was:
December 2004 June 2005
IFRS SA GAAP IFRS SA GAAP
Earnings per share
(cents) 469.5 479.8* 1 089.8 1 168.1
Headline earnings per
share (cents) 460.0 470.3* 968.8 1 045.8
*As reported previously, but before a reduction of 1.5 cents per share
for the change in operating lease costs written-off on a straight line
basis.
REVIEW OF GROUP RESULTS
Revenue increased by 27% to R26.2 billion against a background of
little or no inflation in our high turnover vehicle businesses. While
cost of sales and operating expenses increased by a similar rate,
depreciation (net of recoupments) increased by 30%, reflecting the
higher vehicle fleets, as well as lower recoupments. The operating
margin reduced slightly from 8.5% to 8.1%. Operating profit increased
by 22% to R2 132 million. Despite the average net interest bearing
debt rising by 41% to R8 202 million, the net interest charge
increased by 14%, benefiting from lower borrowing costs. Approximately
R900 million of debt was incurred towards the end of the reporting
period on the acquisition of the MCC group and its accompanying debt,
as well as the purchase of 3.5 million Imperial shares in terms of the
Executive Share Purchase Scheme, approved by shareholders in November.
The effective tax rate was 34%, compared to 31%, increased by the non-
deductibility of R127 million in interest and the fair value
adjustments of the embedded derivative in respect of the Lereko BEE
transaction concluded in June last year.
This transaction, in terms of which Lereko Mobility, 51% owned by a
black consortium and 49% by Imperial, acquired 14.5 million Imperial
shares from existing shareholders, is accounted for as a share buy-
back. Due to the structure of the funding mechanism, Imperial
consolidates Lereko Mobility and treats the full number of shares as
treasury stock, thereby reducing the weighted average number of shares
in issue by 14.5 million shares to 187.1 million. Against the reduced
number of shares in issue, the full funding cost of the transaction,
comprising of preference dividends as well as interest and an equity
linked interest bonus on the Lereko debentures, are included as a
charge to the income statement. Provision for the equity linked
interest bonus amounted to R83 million, calculated as to 25% of the
amount by which the value of an Imperial share exceeds R145.25 in
October 2010, multiplied by 14.5 million, being the number of Lereko
debentures in issue. In determining this amount, the strong rise in
the Imperial share price from R101.80 in June 2005 to R140.50 in
December 2005 (which projects a far higher priced than R145.25 in
October 2010) had by far the largest impact.
The lower number of shares in issue accounts for the difference in
growth in earnings of 23% to R1 157 million and headline earnings per
share of 34% to 617 cents.
The annualised return on equity was 26% compared to 23%. In comparing
the ROE to the 22% published in respect of the full year to June 2005,
the effect of the R1.1 billion reduction in equity on the
implementation of IFRS should be borne in mind.
Net interest bearing debt at December 2005 increased by R2 595 million
over June 2005, causing net gearing (as restated) to increase from 73%
to 102%. Some components of this increase are the following:
- Acquisitions and their accompanying debt (principally MCC and
Bulktrans) of R550 million
- Expansion capex of R1 328 million, inter alia contributing the 14%
growth in our vehicle fleets from 42 123 to 47 811 units
- Facilitating the Lereko transaction with R600 million
- Funding the working capital requirements of the growth in revenue in
our distributorship division, which by its nature as an importer,
distributor and dealer in motor vehicles has a long working capital
cycle, as well as strong growth in revenue in the motor dealerships
division. Combined, these divisions had an annualized turnover of some
R30 billion compared to R22 billion in the corresponding period
- The funding of 3.5 million Imperial shares in terms of the Executive
Share Purchase Scheme.
During November, the debt raising programme of Imperial Capital was
launched with a bond issue of R800 million and subsequently followed
up with a tap issue of another R200 million at a rate of 60 basis
points above the government benchmark rate. Good progress is being
made with the transfer of fleet assets into Imperial Capital and to
date assets to the value of R1.6 billion have been transferred and
pledged to bond holders. We are confident that this ring-fenced entity
established to eventually house the bulk of our revenue producing
assets will gradually start to make a valuable contribution to the
debt capital structure and borrowing costs of the group.
Cash flow from operating activities increased by 40% from R1 054
million to R1 474 million. Cash utilized for investing activities went
up from R1 625 million to R2690 million. A total of R2110 million
(2004: R1562 million) was spent on capital expenditure of which R1328
million was for expansion. The group generated free cash flow of R693
million compared to R586 million in the previous period an improvement
of 18%.
REVIEW OF DIVISIONS
LOGISTICS
R million 2005 2004 % change
Revenue 6 249 6 340 (1)
Operating profit 404 370 9
Operating margin (%) 6.5 5.8
Operating assets 7 628 6 875 11
This was a strong performance in a relatively buoyant market which is
characterised by pricing pressure from low inflation and tough
competition. Barriers to entry to the market have been lowered as new
and used truck prices declined and small businesses are encouraged and
assisted to enter the market.
Locally, higher fuel prices are typically recovered from customers,
but indeed intensify overall pricing pressure. This was countered by
increased efficiencies, leaving the operating margin in the domestic
business slightly higher at 8.4% compared to 8.3% previously,
following a revenue increase of 12% to R3 572 million.
The revenue of Imperial Logistics International in Europe was affected
by the sale of the lower margin JH Bachmann clearing and forwarding
business at the end of the previous financial year. On a like for like
basis, revenue in Europe increased by 16%.
This business returned a good performance all round despite a sluggish
German economy. Its exposure to the European steel and automotive
industries stood it in good stead. Growing German steel exports to
China and elsewhere were good for our business. The operating margin
in Europe increased to 3.8% from 3.2%, aided by the JH Bachmann
disposal.
LEASING AND FLEET MANAGEMENT
R million 2005 2004 % change
Revenue 1 464 1 269 15
Operating profit 239 240
Operating margin (%) 16.3 18.9
Operating assets 4 413 3 425 29
Market conditions for this division remained challenging, with
outsourcing demand being subdued by strong corporate balance sheets
and an increased offering of maintenance plans from manufacturers and
dealers at competitive rates. Low interest rates are impacting on
margins, especially as it applies to the division"s free capital.
Revenue growth was pleasing and against the trend in the industry. The
fleet grew by 2%, excluding the 719 units in MCC housed in this
division.
A large government contract in the division was due to expire at the
end of May last year but was extended throughout the period under
review, albeit at lower margins. A tender for the renewal of the
contract has been submitted.
The forklift operations in South Africa performed well with strong
demand buoyed by general economic activity and good pricing of
equipment due to the strong rand. The UK operation grew its revenue
strongly but its operating profit was lower.
The MCC acquisition became effective at the end of the period and is
expected to make a healthy contribution.
AVIATION
R million 2005 2004 % change
Revenue 1 721 1 233 40
Operating profit 141 120 18
Operating margin (%) 8.2 9.7
Operating assets 3 712 2 806 32
Improved revenues came from a steady performance by Safair, increased
turnover from NAC, improvement at Air Contractors and the inclusion of
Naturelink which was acquired in October 2004. Operating profit did
not keep pace with the revenue increase. Naturelink performed poorly
in the period.
The division is still suffering from the effects of the strong Rand on
US$ and Euro based revenues which represent about half of the total.
Safair has discontinued writing new finance leases on aircraft and
concentrates on higher value added services and aircraft trading. We
are well placed for these activities through Safair"s maintenance and
contract flying abilities and NAC has valuable agencies for general
aviation products as well as used aircraft trading abilities. Aircraft
stock is now better priced following a period of relative currency
stability.
CAR RENTAL AND TOURISM
R million 2005 2004 % change
Revenue 1 687 1 589 6
Operating profit 249 249
Operating margin (%) 14,8 15,7
Operating assets 2 492 2 106 18
The car rental business showed growth in rental days of 13% and 8% in
revenue. Low cost airlines have created a new domestic travel market
which has stimulated demand. However, margins are under pressure from
new entrants buying market share with low rates.
Operating profit in the car rental business was 5.5% behind last year
following lower recoupments. Our wholly owned tourism interests were
under pressure and profit was lower than last year. Used car retailing
in Auto Pedigree was buoyant with 5 new branches opened in the period.
The Chauffeur Drive and panelshops performed admirably.
Tourvest"s earnings per share for its first half was 8% down to 5.6
cents. Its retail merchandising division performed well.
DISTRIBUTORSHIPS
R million 2005 2004 % change
Revenue 7 655 4 857 58
Operating profit 647 451 43
Operating margin (%) 8.5 9.3
Operating assets 5 901 3 625 63
The division has invested heavily in dealerships, warehousing,
logistics, staff development and working capital to take advantage of
very favourable market conditions in the industry. At the same time,
consumer confidence is running high on the back of a strong economy,
low interest rates and growing disposable income, especially among
young upwardly mobile black consumers.
Passenger vehicles, light commercials, trucks, motor cycles and allied
products have enjoyed substantial growth over the past couple of
years.
The inclusion of our nine Ford dealerships in Australia accounted for
a large percentage of the revenue increase, although they sustained a
small loss.
Despite slightly reduced margins, dealership profitability has
increased due to higher sales and an increased vehicle park. In South
Africa, the division now has 92 passenger car dealerships.
Truck distributor, Tyco, enjoyed good profit and revenue growth with
the distribution of strong brands. Industrial demand for transport
services is strong and truck prices have come down to levels which can
attract many new entrants to the industry. Tyco recently entered the
bus market with products from DAF and soon from China.
Lectrolite continued to deliver a steady performance.
DEALERSHIPS
R million 2005 2004 % change
Revenue 7 313 6 040 21
Operating profit 190 156 22
Operating margin (%) 2.6 2,6
Operating assets 2 968 2 238 33
As in the Distributorships division, and for the same reasons, this
division benefits from buoyant consumer demand.
The division"s new vehicle sales have marginally exceeded the 24%
growth in the market (excluding sales by the Distributorships
division) in the past six months. Our dealership used vehicles
retailed grew strongly at 27% and we see this market as offering more
growth opportunities into the future.
This division operates in the local manufacturers" franchise system
which somewhat limits growth beyond the natural expansion of the
market. It is therefore a resolve of the division to find other
sources for growth whilst maximizing opportunities from existing
franchises. Profit growth from parts and workshop services matched
that of vehicle sales, which is seen as an area of increased focus for
us. Margins are however constrained by the impact of inflation on
costs while new vehicle prices have remained static and used vehicle
prices continued to decrease.
Our DaimlerChrysler franchises are the largest contributor to the
division"s profits and experienced limited profit growth as
substantial new investment had to be made in dealership facilities.
This on-going investment is expected to yield improved results.
We have a good spread of franchises making up our 110 dealerships in
the division, including four Nissan dealerships in Sweden acquired in
November. Several upgrades of premises have been done and more are
planned.
INSURANCE
R million 2005 2004 % change
Revenue 1 293 963 34
Operating profit 301 207 45
Operating margin (%) 23.3 21.5
Operating assets 2 985 2 216 35
Premium income growth exceeded growth in vehicle sales, reflecting
market share gains and growth in the non-motor portfolios of the short
term and life businesses. The highest area of premium income growth
occurred from the group"s Distributorship"s division, where financial
services sales are strong and we enjoy a healthy share of the finance
and insurance market.
The solid performance of the equity markets in the past year have
contributed significantly to the profits of the division, as we have a
relatively high equity and bond content in our investment portfolios,
which now stand at R1 642 million, excluding cash of R559 million. A
good underwriting result complemented the investment returns.
The National Credit Bill, which will be enacted shortly, will prohibit
the use of single premium business which comprises a majority share of
credit life business conducted in the dealer based market. We are
prepared for the implementation of the changes brought about by the
bill for the furtherance of consumer protection in the industry. As a
specialist in the dealer based market, we expect to gain long term
benefits from this important change in the industry.
ASSOCIATES
Imperial Bank had an excellent six months and more than doubled its
profit, benefiting from strong growth in motor finance and a
favourable credit environment. Total advances are R20.4 billion, 29%
up from last year. R12.2 billion (2004: R8.1 billion) is in motor
finance. Imperial"s income from the bank increased from R18 million
(as restated) to R89 million.
Renault benefited from good marketing initiatives and increased its
share of the fast growing motor retail market in South Africa.
The group"s 50% share in Safair Lease Finance and in Air Contractors
contributed R37 million compared to R21 million last year, partly due
to lower interest costs following the introduction of further
shareholders" funds in SLF, and a better operating result in Air
Contractors. No new business has been written in SLF, nor is any
planned.
Ukhamba continues to progress and contributed R11 million to our
bottom line. The strong performance of DAWN Ltd, in which Ukhamba
holds a 34% share contributed well towards this.
PROSPECTS
We do not expect to show the same growth in headline earnings per
share for the full year as we have for the half year as the
convergence of high vehicle sales growth, seasonal business in some
parts of our group, and strong equity markets are not expected to be
repeated. However, market conditions and our operations have exceeded
our expectations and we should deliver a rewarding set of results to
shareholders.
Economic conditions in South Africa are favourable and are expected to
remain good, as confidence in the economic and social transformation
has settled in. The economic environments in which our international
businesses operate are also conducive to the achievement of
satisfactory results.
Imperial has high long term growth targets and we believe we can meet
them.
CAPITAL DISTRIBUTION
ORDINARY SHAREHOLDERS
Notice is hereby given that a capital distribution of 230 cents per
ordinary share has been declared in terms of the general authority
granted at the annual general meeting of shareholders held on 1
November 2005 and is payable to ordinary shareholders recorded in the
registers of the company at the close of business on Friday, 31 March
2006. In compliance with the requirements of STRATE, the electronic
settlement and custody system used by the JSE, the company has
determined the following salient dates for the payment of the capital
distribution:
2006
Last day to trade cum-capital distribution Friday, 24 March
Shares commence trading ex-capital distribution Monday, 27 March
Record date Friday, 31 March
Payment date Monday, 3 April
Share certificates may not be dematerialised/rematerialised between
Monday, 27 March 2006 and Friday, 31 March 2006, both days inclusive.
On Monday, 3 April 2006, 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 April 2006 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 April
2006.
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. The
elections by emigrants for the above purpose must be made through the
Authorised Dealer in foreign exchange controlling their blocked
assets. Payments due to non-residents are freely transferable from the
Republic.
PREFERRED ORDINARY SHARES (UNLISTED)
Notice is hereby further given that a capital distribution of 267.5
cents per preferred ordinary share has been declared and is payable to
preferred ordinary shareholders recorded in the registers of the
company at the close of business on Thursday, 30 March 2006.
On Friday, 31 March 2006 the capital distribution will be
electronically transferred to the bank accounts of preferred ordinary
shareholders.
On behalf of the board
RA Venter
Group Company Secretary
Johannesburg
28 February 2006
NON-EXECUTIVE DIRECTORS
L Boyd (Chairman), E Molobi (Deputy Chairman), PL Erasmus, P Langeni,
MJ Leeming, JR McAlpine, VJ Mokoena, PSMolefe, MV Moosa, MV Sisulu, A
Tugendhaft, Y Waja
EXECUTIVE DIRECTORS
WG Lynch (Irish), RJ Boettger, MP de Canha, RL Hiemstra, AH Mahomed,
GW Riemann (German), CE Scott
COMPANY SECRETARY
RA Venter
BUSINESS ADDRESS AND REGISTERED OFFICE
Imperial Place, Jeppe Quondam, 79 Boeing Road East, Bedfordview, 2007
SHARE TRANSFER SECRETARIES
Computershare Investor Services (Proprietary) Limited, 70 Marshall
Street, Johannesburg, 2001
SPONSOR
Merrill Lynch SA (Pty) Limited, 138 West Street, Sandown, Sandton,
2196
The results announcement is available for viewing
on the Imperial Holdings website: http://www.imperial.co.za and on
SENS
SEGMENTAL INFORMATION
25 December
Leasing
and fleet
INCOMESTATEMENT Group Logistics management
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
BUSINESS SEGMENTATION
Revenue
- Sales of goods 15 521 10 964 351 313 283 351
- Rendering of
services 9 446 8 802 5 737 5 813 984 729
- Gross premiums
received 1 175 859
- Other 30 28 28 26 1
26 172 20 653 6 116 6 152 1 268 1 080
Inter-segment
revenue 133 188 196 189
26 172 20 653 6 249 6 340 1 464 1 269
Operating
expenses
excluding gains
and losses on
investments 23 467 18 425 5 601 5 739 909 787
Investment
income (51) (33)
Fair value gains
investments (192) (121)
Depreciation 871 745 251 237 332 259
Recoupments (55) (116) (7) (6) (16) (17)
Operating profit 2 132 1 753 404 370 239 240
Foreign exchange
gains/(losses) 34 (16) (6) (1) 1 5
Fair value
(losses)/gains on
foreign exchange
derivatives (53) (71) (7) (9)
Fair value loss
on embedded
financial
instrument
(Lereko
Mobililty) (83)
Profit before
net financing
costs 2 030 1 666 398 369 233 236
Net financing
costs (352) (309) (38) (54) (90) (77)
Income from
associates and
joint ventures 170 74 3 15
Profit before
exceptional
items 1 848 1 431 363 330 143 159
GEOGRAPHIC SEGMENTATION
Revenue 26 172 20 653 6 249 6 340 1 464 1 269
- South Africa 21 141 16 666 3 572 3 178 1 166 1 074
- Rest of Africa 494 424 117 93 155 77
- Rest of world 4 537 3 563 2 560 3 069 143 118
Operating profit 2 132 1 753 404 370 239 240
- South Africa 1 944 1 583 301 265 196 206
- Rest of Africa 73 46 6 6 30 19
- Rest of world 115 124 97 99 13 15
Net financing
costs 352 309 38 54 90 77
- South Africa 328 291 44 50 76 68
- Rest of Africa 12 8 1 2 10 4
- Rest of world 12 10 (7) 2 4 5
BALANCESHEET
BUSINESSSEGMENTATION
Assets
Property, plant
and equipment 3 194 2 436 1 085 981 158 109
Intangible assets
(including
goodwill) 728 539 258 232 10 12
Investments,
loans and
associates 2 323 1 735 2 10
Leasing assets 5 771 4 375 3 444 2 556
Transport fleet 2 655 2 396 2 750 2 485
Vehicles for
hire 1 162 972
Inventories 5 932 4 076 181 167 357 355
Trade and other
receivables 7 658 6 038 3 354 3 008 434 393
Cash in financial
services
businesses 559 404
Operating assets 29 982 22 971 7 628 6 875 4 413 3 425
Deferred tax
assets 365 313
Loans to
associates
and other
investments 1 347 643
Taxation in
advance 89 105
Cash and cash
equivalents 689 603
Total assets per
balance sheet 32 472 24 635
LIABILITIES
Insurance funds 1 148 796
Retirement
benefit
obligations 178 213 178 213
Accounts payable
and provisions 9 011 6 570 3 075 2 597 624 481
Other non-current
financial
liabilities 136
Non-interest-
bearing
liabilities 10 473 7 579 3 253 2 810 624 481
Interest-bearing
borrowings 10 362 7 359
Equity settled
interest-bearing
borrowings 771
Deferred tax
liabilities 873 398
Current tax
liabilities 1 043 643
Total liabilities
per balance
sheet 23 522 15 979
GEOGRAPHIC SEGMENTATION
Operating assets 29 982 22 971 7 626 6 875 4 413 3 425
- South Africa 25 883 19 267 5 821 4 983 3 706 2 719
- Rest of Africa 877 667 151 128 309 277
- Rest of world 3 222 3 037 1 654 1 764 398 429
Non-interest-
bearing
liabilities 10 473 7 579 3 253 2 810 624 481
- South Africa 8 896 6 251 2 336 1 791 517 376
- Rest of Africa 402 308 45 43 63 50
- Rest of world 1 175 1 020 872 976 44 55
Interest-bearing
borrowings 10 362 7 359 1 439 1 564 2 539 2 058
- South Africa 9 389 6 573 1 229 1 335 2 244 1 731
- Rest of Africa 317 348 79 74 169 207
- Rest of world 656 438 131 155 126 120
Gross capital
expenditure 3 278 2 714 636 460 714 975
- South Africa 3 000 2 153 545 369 582 555
- Rest of Africa 69 153 22 29 39 116
- Rest of world 209 408 69 62 93 304
Gross capital
expenditure 3 278 2 714 636 460 714 975
Less: Proceeds
on disposal (1 168) (1 152 (141) (84) (304) (465)
Net capital
expenditure 2 110 1 562 495 376 410 510
SEGMENTAL INFORMATION
25 December
Car rental
INCOMESTATEMENT Aviation and tourism Distributorships
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
BUSINESS SEGMENTATION
Revenue
- Sales of goods 666 330 763 692 6 915 3 912
- Rendering of
services 1 054 903 835 815 445 243
- Gross premiums
received
- Other 1
1 721 1 233 1 598 1 507 7 360 4 155
Inter-segment
revenue 89 82 295 702
1 721 1 233 1 687 1 589 7 655 4 857
Operating
expenses
excluding gains
and losses on
investments 1 481 1 073 1 337 1 263 6 961 4 380
Investment income
Fair value gains
investments
Depreciation 109 95 121 115 48 28
Recoupments (10) (55) (20) (38) (1) (2)
Operating profit 141 120 249 249 647 451
Foreign exchange
gains/(losses) (3) (2) (1) 45 (12)
Fair value
(losses)/gains on
foreign exchange
derivatives (46) (63)
Fair value loss
on embedded
financial
instrument
(Lereko
Mobililty)
Profit before net
financing costs 138 118 249 248 646 376
Net financing
costs (85) (71) (19) (13) (47) (19)
Income from
associates and
joint ventures 37 21 28 19
Profit before
exceptional
items 90 68 230 235 627 376
GEOGRAPHIC
SEGMENTATION
Revenue 1 721 1 233 1 687 1 589 7 655 4 857
- South Africa 1 356 906 1 569 1 436 6 141 4 794
- Rest of Africa 59 103 95 63
- Rest of world 365 327 59 50 1 419
Operating profit 141 120 249 249 647 451
- South Africa 129 110 239 242 652 452
- Rest of Africa 8 7 1 (1)
- Rest of world 12 10 2 (6)
Net financing
costs 85 71 19 13 47 19
- South Africa 79 68 20 13 35 18
- Rest of Africa (1) 1 3 1
- Rest of world 6 3 (1) 9
BALANCESHEET
BUSINESSSEGMENTATION
Assets
Property, plant
and equipment 117 110 210 180 807 515
Intangible assets
(including
goodwill) 83 20 260 234 23
Investments,
loans and
associates 342 59 2 2 169 254
Leasing assets 2 002 1 623 348 216
Transport fleet
Vehicles for hire 1 164 980
Inventories 602 463 413 342 3 041 1 446
Trade and other
receivables 566 531 443 368 1 513 1 194
Cash in financial
services
businesses
Operating assets 3 712 2 806 2 492 2 106 5 901 3 625
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 548 319 791 730 2 543 1 680
Other non-current
financial
liabilities
Non-interest-
bearing
liabilities 548 319 791 730 2 543 1 680
Interest-bearing
borrowings
Equity settled
interest-bearing
borrowings
Deferred tax
liabilities
Current tax
liabilities
Total liabilities
per balance
sheet
GEOGRAPHIC
SEGMENTATION
Operating assets 3 712 2 806 2 492 2 106 5 901 3 625
- South Africa 3 191 2 444 2 459 2 052 5 218 3 586
- Rest of Africa 21 34 75 39
- Rest of world 521 362 12 20 608
Non-interest-
bearing
liabilities 548 319 791 730 2 543 1 680
- South Africa 430 293 782 678 2 407 1 662
- Rest of Africa 9 36 27 18
- Rest of world 118 26 16 109
Interest-bearing
borrowings 2 982 2 175 566 377 1 739 481
- South Africa 2 675 2 013 566 342 1 298 448
- Rest of Africa 35 70 33
- Rest of world 307 162 371
Gross capital
expenditure 310 216 856 665 577 335
- South Africa 276 191 849 640 564 335
- Rest of Africa 7 8 1
- Rest of world 34 25 17 12
Gross capital
expenditure 310 216 856 665 577 335
Less: Proceeds
on disposal (104) (63) (350) (349) (237) (176)
Net capital
expenditure 206 153 506 316 340 159
SEGMENTAL INFORMATION
25 December
Head office
Motor vehicle and
INCOMESTATEMENT dealerships Insurance eliminations
2005 2004 2005 2004 2005 2004
Rm Rm Rm Rm Rm Rm
BUSINESS SEGMENTATION
Revenue
- Sales of goods 6 542 5 366 1
- Rendering of
services 351 267 18 14 22 18
- Gross premiums
received 1 175 858 1
- Other 1 1
6 893 5 633 1 193 873 23 20
Inter-segment
revenue 420 407 100 90 (1 233) (1 658)
7 313 6 040 1 293 963 (1 210) (1 638)
Operating
expenses
excluding gains
and losses on
investments 7 105 5 868 1 230 906 (1 157) (1 591)
Investment
income (51) (33)
Fair value gains
investments (192) (121)
Depreciation 18 17 5 4 (13) (10)
Recoupments (1) (1) 3
Operating profit 190 156 301 207 (39) (40)
Foreign exchange
gains/(losses) (4) (3) (1)
Fair value
(losses)/gains on
foreign exchange
derivatives 1
Fair value loss
on embedded
financial
instrument
(Lereko
Mobililty) (83)
Profit before
net financing
costs 190 156 301 203 (125) (40)
Net financing
costs (27) (17) 1 1 (47) (59)
Income from
associates and
joint ventures 2 1 100 18
Profit before
exceptional
items 165 140 302 204 (72) (81)
GEOGRAPHIC
SEGMENTATION
Revenue 7 313 6 040 1 293 963 (1 210) (1 638)
- South Africa 7 264 6 040 1 199 874 (1 126) (1 636)
- Rest of Africa 94 89 (26) (1)
- Rest of world 49 (58) (1)
Operating profit 190 156 301 207 (39) (40)
- South Africa 190 156 270 191 (33) (39)
- Rest of Africa 31 16 (3) (1)
- Rest of world (3)
Net financing
costs 27 17 (1) (1) 47 59
- South Africa 27 17 (1) (1) 48 58
- Rest of Africa (1)
- Rest of world 1
BALANCESHEET
BUSINESS
SEGMENTATION
Assets
Property, plant
and equipment 592 349 97 88 128 104
Intangible assets
(including
goodwill) 65 23 27 16 2 2
Investments,
loans and
associates 10 7 1 642 1 058 148 353
Leasing assets (23) (20)
Transport fleet (95) (89)
Vehicles for hire (2) (8)
Inventories 1 522 1 306 (184) (3)
Trade and other
receivables 779 553 660 650 (91) (659)
Cash in financial
services
businesses 559 404
Operating assets 2 968 2 238 2 985 2 216 (117) (320)
Deferred tax
assets
investments
Taxation in
advance
Cash and cash
equivalents
Total assets per
balance sheet
LIABILITIES
Insurance funds 1 148 796
Retirement
benefit
obligations
Accounts payable
and provisions 1 017 768 620 620 (207) (625)
Other non-current
financial
liabilities 136
Non-interest-
bearing
liabilities 1 017 768 1 768 1 416 (71) (625)
Interest-bearing
borrowings
Equity settled
interest-bearing
borrowings
Deferred tax
liabilities
Current tax
liabilities
Total liabilities
per balance sheet
GEOGRAPHIC
SEGMENTATION
Operating assets 2 968 2 238 2 985 2 216 (115) (320)
- South Africa 2 927 2 238 2 665 1 949 (104) (704)
- Rest of Africa 320 267 1 (78)
- Rest of world 41 (12) 462
Non-interest-
bearing
liabilities 1 017 768 1 768 1 416 (71) (625)
- South Africa 985 768 1 511 1 255 (72) (572)
- Rest of Africa 257 161 1
- Rest of world 32 (53)
Interest-bearing
borrowings 333 398 1 1 763 305
- South Africa 310 398 1 1 1 067 305
- Rest of Africa (1) (1)
- Rest of world 23 (303) 1
Gross capital
expenditure 186 58 11 9 (12) (4)
- South Africa 186 58 11 9 (13) (4)
- Rest of Africa
- Rest of world 1
Gross capital
expenditure 186 58 11 9 (12) (4)
Less: Proceeds
on disposal (30) (15) (2)
Net capital
expenditure 156 43 11 9 (14) (4)
Date: 02/03/2006 08:00:35 AM Produced by the JSE SENS Department
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