Imperial sheds assets

A new-look, restructured Imperial Holdings has, since 2015, disposed of, or is busy disposing of, 42 businesses with a total revenue of R11.9 billion and operating profit of R937 million.

These disposals include Regent Insurance's non-South African operations, as well as Jurgens Caravans and Prestige Safari.

Speaking at the group's results presentation for the six months ended 31 December, in Johannesburg on Tuesday, CEO Mark Lamberti added that 82 properties had been, or were in the process of being sold. The capital employed in these businesses and properties totalled R5.1 billion.

The long list of disposals came as Imperial was shedding “non-core, strategically misaligned, underperforming or low-return-on-effort assets”.

The proceeds from disposals will go some way in reducing Imperial's net debt-to-equity ratio of 98%, which is much higher than the 73% in June last year. The increase is the result of the need for working capital and the R3 billion, 95% acquisition of logistics company Palletways in July last year.

Proceeds from disposals are expected to total R4.6 billion in the second half of the financial year.

Any new acquisitions or capital expenditure will have to serve Imperial's goal of maintaining its South African market leadership in the logistics and motor vehicle businesses, and ensuring that logistics revenue and profit in the rest of Africa ultimately equal that of South Africa.

The group also wants to expand its vehicle and related businesses in the region.

Acquisitions outside Africa required a focus on logistics, noted Lamberti.

Including discontinued operations and businesses held for sale, Imperial saw revenue for the six-month period increase by 2%, to R61.3 billion, compared with the same period last year. Operating profit increased 4%, to R3.18 billion.

Headline earnings a share were down 15%, to 682c.

Revenue from outside South Africa made up 42% of group revenue, at R25 billion, and 36% of operating profit, at R1 billion.

Growth in foreign operations is to offset the limited growth opportunities in South Africa.

Non-vehicle operations made up 46% of operating profit. The aim was to reduce the group's exposure to the exchange rate related to importing vehicles directly, said Lamberti.

Imperial's activities have been consolidated into two divisions, namely Imperial Logistics and Motus Corporation.

Motus incorporates all the group's activities to do with motoring.

Logistics saw a 16% increase in revenue for the six months ended 31 December, to R25.3 billion, with operating profit up 12%, to R1.3 billion.

Revenue at Motus, which incorporates the now defunct Associated Motor Holdings, moved up 3%, to R35 billion, with operating profit up 6%, to R1.6 billion.

The logistics business in South Africa saw a 20% increase in operating profit, to R498 million, owing to increased commodity volumes, among other factors, noted Lamberti.

The African logistics business saw zero profit growth, at R397 million, as slowing growth rates and rising inflation and interest rates – resulting in lower consumer demand – took their toll.

Logistics International was boosted by the acquisition of Palletways, said Lamberti.

He noted that the logistics business, in general, was viewed as Imperial's “major growth vector”.

Within Motus, the vehicle import and distribution business recorded a 2% increase in operating profit, to R390 million. The growth flowed from vehicle price increases, as well as solid performances from the Hyundai and Kia marquees, despite overall declining vehicle sales in South Africa.

The vehicle retail and rental business also saw a 2% increase in operating profit, to R694 million, driven by price increases and growth in pre-owned vehicle sales.

The aftermarket parts business grew operating profit by 10%, to R173 million, with operating profit up 16%, to R388-million, within the motor-related financial services business.

Looking ahead, Lamberti said conditions for the remainder of the financial year remained challenging, but noted that they were not expected to deteriorate any further.

However, he warned that any sign of green shoots might disappear should the National Budget, as presented in Parliament this week, proved “unduly onerous”, or if a Cabinet reshuffle happened immediately afterwards.

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