Imperial to have answer on unbundling ‘by this time next year’

22nd August 2017

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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In a quest for shareholder value, work is in progress to determine the viability and benefits to Imperial shareholders of listing Imperial Logistics and Motus separately, says Imperial CEO Mark Lamberti.

Speaking at the announcement of the JSE-listed group’s financial results for the year ended June 30 in Johannesburg on Tuesday, he said the group was to “make an announcement on this before this time next year”.

Lamberti, who came on board as CEO in 2014, has organised Imperial into two clear business units. Imperial Logistics has assets mainly in South Africa, the rest of Africa and Europe. Motus encompasses Imperial’s vehicle import and distribution; vehicle retail and rental; aftermarket parts; and motor-related financial services operations.

The reorganisation of the group was part of an effort to create portfolio coherence, or a “logical agglomeration that facilitated value creation”.

This process saw Imperial, since the first half of the 2015 financial year, dispose of 42 businesses and 52 properties that were either under-performing, offered low return on effort, or that were strategically incompatible with the group. These businesses generated revenues of R11.2-billion and operating profit of R982-million at the time of sale.

At the same time, in pursuit of growth, Imperial invested R5.4-billion to acquire 15 companies that generated revenue of R13.7-billion and operating profit of R880-million in their first full year of operation.

The idea behind the spate of disposals and acquisitions was to bring Imperial “closer to the portfolio we desire”, said Lamberti.

“We wanted to make sure the subsidiaries were more competitive. Groups do not compete, subsidiaries do.”

Imperial reported a 1% increase in revenue for the year ended June 30, to R119.6-billion, compared with the previous financial year, with operating profit up 2%, to R6.5-billion.

Around 43% of revenue came from outside South Africa, as did 37% of operating profit.

Imperial Logistics contributed 43% to group revenue, and 45% to operating profit. Motus contributed 57% to group revenue and 55% to operating profit.

Imperial Logistics had a better year than Motus.

Imperial Logistics reported 6% growth in revenue, to R50.7-billion, and a 9% jump in operating profit, to R2.8-billion.

Motus saw revenue decrease by 3%, to R66.5-billion, with operating profit also down 3%, to R3.3-billion.

Imperial Logistics experienced growth in its South African and international markets, with its performance in Africa, however, depressed by weakening currencies, slowing economic growth rates, as well as rising inflation and interest rates, which resulted in lower consumer demand in many African markets.

Around 67% of Imperial Logistics’s revenue and operating profit comes from outside South Africa.

The performance of Motus was hampered by a slowing vehicle market and higher cost of inventory in the vehicle import and distribution business.

Around 24% of Motus’s revenue and 12% of operating profit come from outside South Africa.

Lamberti said the aim of growing foreign revenue was to ensure Imperial was less susceptible to currency fluctuations, especially in terms of vehicle imports into South Africa.

In highlighting the group’s strategic challenges, Lamberti said Imperial was forced to seek its fortunes outside South Africa – which was a low growth environment – as the group’s high market shares in the logistics and automotive industries meant it would probably be prohibited by the Competition Commission from expanding much further.

“The tricky currency game” also affected the business with its R14-billion in vehicle and part imports, R8-billion in foreign debt and the four major currencies it traded in, namely the dollar, rand, pound and Australian dollar.

Imperial Logistics SA to be 51% Empowered
Imperial has started a process to introduce a direct 30% black shareholding into Imperial Logistics South Africa.

This would result in Imperial Logistics South Africa becoming a 51% black-owned enterprise, said Lamberti.

South Africans More Realistic about Cars
There was a significant buying down trend in the South African vehicle retail market, noted Lamberti, with consumers either selecting smaller, more affordable new vehicles, or used vehicles.

He said he didn’t know whether this was a function of the struggling economy, “or more realism” surfacing in the South African market, known for its love of premium cars.

It seemed people were “becoming more comfortable” driving smaller cars, or pre-owned cars, said Lamberti.

 

Edited by Creamer Media Reporter

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