JSE-listed Imperial Holdings has held its profits steady and generated record revenue in the year to June 30, in an environment under pressure, while preparing to kick off the new financial year with a restructured group to ride out the sombre economic environment.
The group is hoping to break its stagnant shareholder value growth, which has not improved significantly over the past ten years, and tidy up its current structure through structural changes within the group, CEO Mark Lamberti told media on Tuesday.
Speaking at a media roundtable post Imperial’s financial year-end results presentation, he said two new integrated “lines of mobility” operating under separate management structures were now dedicated exclusively to logistics and vehicles to sharpen the company’s focus.
The aim is to offer investors greater access to more focused assets.
The group’s entire logistics interests will now be managed as the standalone logistics division, with three subdivisions, namely logistics South Africa, logistics rest of Africa and logistics international.
All of Imperial’s vehicle interests, including vehicle import distribution and dealerships, vehicle retail rental and aftermarket parts, and motor-related financial services, would be managed as the Vehicles entity, now made up of the two subdivisions of import, retail, car rental and aftermarket parts and motor-related financial services.
The restructure of the portfolio formed part of Imperial’s “path to value creation”.
Along with ensuring the right management succession, attracting future leadership and leveraging technology, Imperial worked to “clarify the portfolio” and embark on strategic disposals during the year under review.
The disposals, throughout the year, of noncore, underperforming, low-return-on-effort, capital-intensive and “strategically misaligned” assets generated proceeds of R5.2-billion, which will initially be used to reduce debt until redeployed.
Some of Imperial’s major disposals included Regent, the sale of which is currently under way, Goscor, Neska, ALS and MixTelematics, as well as 51% of ten entities in AMH Group.
During the year under review, Imperial shed 32 smaller assets, with a further R2.6-billion expected from the sale of nonstrategic properties or sale and leaseback activities over the next 12 to 18 months.
“Excluding Regent, Imperial will have disposed of 29 businesses that used R2.8-billion of invested capital and generated sales of R6-billion and operating profit of R45-million,” the company outlined in the financial results.
Imperial also embarked on the second-largest acquisition in its history, with the purchase of 95% of Palletways, for R3-billion, in July.
In addition, Imperial acquired a 10% minority in the AMH Group, 100% of Teamcar, Maxifren, Fairdeal and Axnosis and a 70% stake in Sasfin Premier Logistics.
The group also bought a further 14% in Midas during the year under review, with the final 10% stake Imperial did not yet own in Midas acquired post year-end.
Further acquisitions included a 70% interest in Imperilog Botswana and a further 10% in Netherlands-based Imres Van den Anker and Humberside Tail Lifts.
FINANCIAL RESULTS
Imperial on Tuesday posted mostly unchanged earnings per share (EPS) and core EPS, and a marginal decline on headline earnings per share (HEPS) for the year ended June 30, 2016.
The company reported EPS and core EPS of 1 581c and 1 747c respectively for the year under review, compared with the EPS of 1 582c and 1 754c reported in the prior year.
HEPS decreased 3% to 1 579c for the year under review.
Net profit after tax edged down 5% from R3.38-billion in 2015 to R3.2-billion in 2016.
Imperial’s revenue and operating profit increased 8% to R118.8-billion and 3% to R6.4-billion respectively, supported by the full-year inclusion of the Imres and S&B Commercials acquisitions.
Strong performances from the vehicle import, distribution and dealerships division and the logistics rest of Africa subdivision also contributed positively to operating profit.
Imperial declared a dividend of 795c a share for 2016, unchanged from the prior year.
Imperial expects single-digit revenue growth and a moderate decline in operating profit for continuing operations during the 2017 financial year.
In the logistics unit, the South Africa and international divisions are expected to report revenue and operating profit growth, while operations in the rest of Africa will produce revenue growth, but a decline in operating profit.
In the vehicles division, the import, retail, car rental and aftermarket parts division is expected to deliver flat revenue and a decline in operating profit, while the motor-related financial services subdivision will report flat revenue and operating profit.