Imperial Holdings proves resilient

South African transportation and mobility group Imperial Holdings on Wednesday reported a 17% rise in headline earnings per share to 1 434 cents for the year ended June from 1 222 cents a year ago. Diluted headline earnings per share were up 16% to 1 330 cents from a previous 1 148 cents.

The annual distribution to shareholders was up 18% to 560 cents per share, consisting of interim and final distributions of 280 cents each.

The group reported a 22% rise in revenue to R66,2-billion, while attributable profit grew 24% to R2,776-billion.

CEO Hubert Brody said: “We are pleased to announce another strong set of results, which, given the challenges to certain divisions of our business, are indicative of the resilience of the group’s business model and our continuous innovation in all divisions.”

Challenges included a weaker rand that affected margins in the vehicle import businesses, a slowdown in vehicle sales due to interest-rate hikes and the introduction of the National Credit Act, even though it was only in effect for the month of June, the group said.

In addition, Commercial Vehicle Holdings, the group’s heavy commercial vehicle distribution business, incurred a loss at the operating level, which necessitated decisive management interventions. However, the group has an extensive exposure to the broader South African economy, and its substantial capital investment across all businesses continued to yield solid gains.

The strongest contributors to revenue were the leasing and capital equipment and distributorships divisions.
New acquisitions contributed approximately 10% to revenue growth, it said.

The relative contributions of the group’s international operations increased strongly, with 25% of revenue, up from 20% in 2006, and 13% of operating profit, up from 8%, earned from sources outside South Africa.

Income from associates increased by 16%. This included growth of 13% to R203-million from the 49,9% interest in Imperial Bank.

Total assets grew by 21,2%, of which investments in associates contributed 3%, property, plant and equipment 3,2%, fleets 2,3%, inventory and trade receivables 6,8% and the others 5,9%.

The group said its portfolio of businesses is being reassessed in pursuit of the optimal business mix, given the economic outlook, the cost of capital and the proven skills set. This is to ensure that capital is allocated to areas where the group expects optimal returns to be achieved, and which are aligned to its broader strategy for achieving long-term sustainable growth.

To this end, Imperial has appointed advisers to assist with evaluating initiatives to release capital from non-core activities and capital-intensive businesses. In addition, the group is defining opportunities for acquisitions and the creation and development of new businesses which fit Imperial’s business model and area of focus.

Looking ahead, the group said certain businesses have not performed to their full potential, and their recovery should assist in continuing to achieve good earnings growth.

However, Brody cautioned that “the retail environment for consumers has deteriorated over the past year and the group expects difficult trading conditions in the motor operations to persist for most of the new financial year. In addition, the impact of the National Credit Act in the insurance operations and possible weaker investment markets may limit growth in our insurance division.

“Despite a weaker investment market, the deteriorating retail environment for consumers and the impact of the National Credit Act on the insurance operations, we expect a continuation of good growth in earnings.

“We have several contra-cyclical businesses which stand to benefit from continuing strength in the South African and global economies we are confident that Imperial is well positioned to deliver sustainable growth.”—I-Net Bridge

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