Despite a “pleasing” start to the second half of the financial year, JSE-listed Imperial expects a somewhat stifled performance for the full year amid a depressed trading environment.

Single-digit revenue growth and unchanged operating profit in continuing operations was expected to be the order of the day for the full-year to June 30.

However, Imperial would stick to a strategy that was working as it operated in a trading environment that was unlikely to improve this year, CEO Mark Lamberti said on Tuesday.

“We expect volume growth throughout our logistics operations to be subdued and national new vehicle sales in South Africa to decline between 5% and 10% in response to fragile consumer confidence and rising interest rates,” he said, unpacking the company’s performance for the first six months of the year, in Rosebank, on Tuesday.

South Africa's growth in the six months under review was depressed by the structural and cyclical impediments to growth, including unemployment and low skills and the early effects of the drought, as well as the deterioration of business confidence and private sector investment, exacerbated by political ineptitude, policy uncertainty and rising perceptions of corruption.

Imperial on Tuesday posted a 6% rise in headline earnings a share to 801c and a 19% increase in basic earnings a share to 881c for the six months to December 31.

Headline earnings grew 5% to R1.6-billion and profit attributable to shareholders 19% to R1.7-billion.

Operating profit was up 7% to R3.1-billion – 34% of which was foreign – while Imperial’s operating margin during the six months to December was maintained at 5.1%.

During the six months under review, revenue increased 6% to a record R59.7-billion.

Imperial generated 59% of its revenues in South Africa, 29% in Europe and 12% in sub-Saharan Africa, leaving the company open to the global performance and volatility of commodity, equity and bond markets since the start of 2016.

A sharp decline in commodity volumes, subdued consumer goods volumes, currency movements in Africa, unusually long periods of low water levels on the River Rhine, a weakening rand/dollar exchange rate and a decline in national new vehicle sales were uncontrollable factors directly influencing Imperial's businesses in the first half of the 2016 financial year, Lamberti noted.

DISPOSALS AND ACQUISITIONS
Meanwhile, Imperial’s strategy of disposing of noncore assets had gained momentum during the first half of the year, with R2.5-billion of the R4.7-billion in proceeds received to date.

The proceeds would be used to reduce debt and redeployed in line with Imperial’s strategic, investment and capital allocation criteria.

During the period under review, Imperial sold its 100% interest in the Regent Group to Hollard Insurance Group and Yellowwoods Group for R2.2-billion. The deal was expected to be concluded post the group’s financial year closure.

Imperial’s 65% interest in Neska was sold to Germany’s Port Authority Hafen und Guterverkehr Koln for R1.3-billion.

Further, an agreement had been entered into to dispose of Imperial’s 67.5% share in the Goscor group to management for R1.03-billion.

The Vehicle Retail, Rental and Aftermarket Parts division sold two panel shop outlets and two commercial dealerships to Lereko Motors, while Imperial Logistics International sold its 75% stake in ALS to the minority founder manager shareholders for R84-million.

Imperial was also working to refine its R8-billion property portfolio, with the potential for the merits of sale and leaseback or outright sale for property that was not considered strategic.

Meanwhile, Imperial embarked on the “reasonably priced, low risk” acquisition of the remaining 10% interest in the AMH Group for R750-million from AMH CEO and Imperial executive director Manny de Canha, who would retire in January 2018.

Imperial would meet R650-million of the consideration through the issue of Imperial shares or cash, with the balance of R100-million paid in cash for foreign shares in the rest of Africa and Australia.