Rand harms Imperial’s performanceComment on this story
Pretoria - Turnover at listed transport and logistics group Imperial Holdings has surged through the R100 billion mark for the first time, even though the sharp depreciation of the rand significantly dented the group’s financial performance.
Mark Lamberti, the new chief executive of Imperial, stressed yesterday that the depreciation of the rand, which affected the cost of vehicle imports, was “the real issue” and had the biggest impact on the group’s results in the year to June.
Lamberti conceded the South African economic environment was “soft” but he got “a little bit annoyed when people get excited that we haven’t drifted into recession with a 0.6 percent growth rate”.
The lack of economic growth was not a major determinant of Imperial’s results at the moment.
“Most people buying motor vehicles are middle to upper income, who are less affected by the effects in the economy.
“The environment is generally low consumer and commercial demand and in all of our businesses we face competitive situations,” he said.
Imperial yesterday reported a 7 percent decline in diluted headline earnings a share to R16.06 from R17.31 in the previous year but diluted core earnings a share were unchanged at R17.90.
Revenue rose 12 percent to R103.6bn – the first time it has exceeded the R100bn mark – from R92.4bn a year ago.
Operating profit improved 2 percent to a record R6.18bn from 6.09bn.
The dividend of R8.20 a share for the year was in line with the previous year.
Lamberti said the results demonstrated the resilience of the group’s portfolio of business, with all divisions but one showing good growth.
“They reflect a performance which we believe was flawless in every controllable respect but we were rather punished by the rapid movement of the rand.”
Imperial was very confident its strategic positioning and operating practices would result in a continued growth of revenue, earnings and value in the medium term “but when the rand moves 20 percent on you it changes the game”.
“On that basis alone, we expect earnings in the first half of the 2015 financial to decline on the prior period. But if the rand stays where it is and that currency movement flows through the system, we expect the second half to right itself for the full year and we will have full-year earnings in line with the current year,” he said.
The vehicle import, distribution and dealership division, which is primarily an exclusive importer of 18 automotive and industrial brands, including Hyundai, Kia and Renault, increased revenue by 5.5 percent to R27.1bn from R25.68bn.
But operating profit slumped almost 32 percent to R1.5bn as the division’s profit margin deteriorated to 5.6 percent from 8.7 percent.
Lamberti stressed the need for the group to continue with its strategy to decouple its performance from the cyclicality of new vehicle sales in South Africa.
He said if that meant building motor businesses that were not related to new car sales “or building our strength in logistics or having a bigger foreign presence, which is a hedge in itself, all of those things need to be done”.
Imperial shares slid early yesterday to a low of R185.30 but recovered to close 1.04 percent up on the day at R197.15.
Stephen Meintjes, an analyst at Imara SP Reid, said Imperial’s share price had dropped because its results were disappointing but recovered after the results presentation, at which it was explained this was due to factors beyond the group’s control.