Johannesburg - Imperial Holdings bolstered income in the year to June thanks to its recent acquisitions, which aided it in lifting revenue 7 percent to R110.5 billion.
Without the deals, revenue would have grown 3 percent, it notes in its results commentary, issued on Tuesday. It says, based on current market conditions, it expects revenue and operating profit for continuing operations to gain in single digits in the current year. “2016 performance, to date, is in line with expectations.”
The company, which is active in logistics, vehicle imports and sales as well as the financial and aftermarket aspects of vehicles, employs more than 51 000 people.
It reported operating profit up a percent to R6.2 billion, and headline earnings per share were unchanged at 1 624c a share. Some 37 percent of its revenue and 32 percent of its operating profit came from what it terms foreign sales. The company notes most of its income comes from Africa and Europe through its five major divisions.
Earnings per share, which does not strip out once-off or unusual items, declined 6 percent to 1 582 c a share.
However, the listed company bolstered free cash flow by a mammoth 111 percent to R4.5 billion.
Imperial says it experienced a “steady deterioration of trading conditions throughout the year,” but saw a “marked improvement in second half performance”.
This, along with the acquisition of Pharmed, Imres and S&B Commercials, resulted in it achieving record revenue and operating profit in the 2015 financial year, it says.
Buying and selling
The group notes it continues to refine its portfolio and will sell off non-core assets, or those that are strategically misaligned, underperforming or of low return on effort. AT the same time, it will acquire mainly foreign businesses to offset the limited growth opportunities dictated by Imperial's position in the local logistics and motor vehicle market.
Imperial’s logistics unit bought 62.5% of Pharmed last July for R148 million. The company, which turns over R612 million a year, buys pharma products that it then distributes and sells to hospitals, private pharmacies and dispensing doctors.
“The Pharmed acquisition augments Imperial Health Sciences in support of Imperial's strategy to integrate pharmaceutical wholesaling and distribution into its service offering,” says the listed company.
Last September, Imperial’s logistics unit also bought 70% in Imres - a wholesaler of pharmaceutical and medical supplies to NGOs, hospitals and retailers - for R647 million. Imres operates in the international medical relief industry, targeting mainly African and emerging countries with developing healthcare needs and turns over around R1.2 billion a year.
Imperial’s last purchase, also last September, was of UK-based S&B Commercials, which its vehicle retail, rental and aftermarket parts division bought out right for R167 million. S&B Commercials is a Mercedes Benz (Commercial and Van) and Fuso dealer in the UK with annual turnover of around R1.7 billion.
“The acquisition enhances our current dealer network by adding new territories to our Mercedes Benz footprint while further diversifying our brand representation in the United Kingdom.”
In addition to its purchases, Imperial agreed to sell Regent Insurance to Hollard. That deal is currently at due diligence stage.
Stripping out
Eliminating the benefit from companies Imperial bought in the year that has just drawn to a close, revenue would only have gained 3 percent, while operating profit would have dropped 4 percent.
Imperial noted, despite improved trading conditions, its operating profit dropped from 6 percent to 5.6 percent because of the weaker rand.
The local currency has dropped to 14 years and, this week, breached the R14 to the dollar mark briefly.
Imperial has been seeking to decouple its performance from the impact of rand weakness on its vehicle import, distribution and dealerships division.
“Progress towards this objective has been achieved by investing in or developing less correlated activities within the automotive value chain, or businesses where our capabilities, experience and expertise enable us to grow at acceptable, sustainable rates of return in new markets and geographies.”
A final dividend of 445 cents per ordinary share (2014: 420 cents per share) has been declared.
IOL