Roy Cokayne
IMPERIAL Holdings has embarked on a process to dispose of certain underperforming assets.
Chief executive Mark Lamberti said yesterday that to increase Imperial’s return on capital and effort, it would be disposing of strategically misaligned, under performing, subscale or low return on effort assets.
He confirmed that a group of assets were under review and Imperial would make decisions about them at the appropriate time.
Lamberti declined to comment on how many assets were under review, what divisions these assets were in or the status of any processes to dispose of any of them. “We don’t talk about any transaction that is under way, either acquisitions or disposals. At the right time we will announce it.”
Imperial’s financial results for the six months to December were dented by a deterioration in the profitability of its vehicle import, distribution and dealerships division. This division’s operating profit declined by 51 percent to R461 million as rand/dollar weakness eroded its competitiveness, unit sales and margins of directly imported new vehicles.
Group revenue grew by 9 percent in the reporting period to R56.2 billion from R51.3bn, with most of this growth attributable to acquisitions.
Group operating profit decreased by 9 percent to R2.87bn from R3.2bn, with the operating margin deteriorating to 5.1 percent from 6.2 percent in the previous comparable period.
Headline earnings a share dropped by 9 percent to 759c from 831c.
Cash flow from operating activities increased by 73 percent to R1.01bn from R587m, largely because of a lower investment in working capital.
Difficult conditions
An interim dividend a share of 350c was declared, which was 14 percent lower than the 400c declared in the previous corresponding period.
Lamberti said these financial results were broadly in line with market expectations and were achieved in difficult economic and trading conditions in South Africa and the euro zone.
He said they reflected challenging macro fundamentals, including rand/US dollar weakness, which had eroded the historic profitability of directly imported vehicles and dampened Imperial’s otherwise solid first-half performance.
Lamberti said the listed transport and mobility group, was pleased with the progress on the group’s diversification strategy. The revenue and operating profit contributions from non-vehicle and foreign businesses continued to grow and now made up a substantial part of the group.
“We are particularly excited by our growth on the continent beyond South Africa. In just four years we have established a business approaching R10bn in annualised revenues in 10 countries to the north,” he said.
Non-vehicle operating profit increased by 6 percent to R1.7bn and now accounts for 57 percent of the group’s operating profit.
Lamberti said the strategy was to grow this further and the trends evident were indicative of the progress Imperial had made with its strategy to build a more foreign-based business, because it already had such large and leading market shares in South Africa.
He said a number of factors could affect Imperial’s results in the months ahead, including the weakening of the rand against the currencies from which the group imported new vehicles, the poor state of the local economy, a much slower than expected recovery of the German economy and the impact of political uncertainty and sustained low oil price on the economy and currency of Nigeria.
Imperial’s operating performance in the second half of its financial year to June would be positive, but earnings for the year would be below that achieved in the previous year.
Shares lost 5.87 percent to close at R190.61 yesterday.