The share price traded 0.89 percent higher at R47.43 on the JSE on Tuesday morning. Photo: Siphiwe Sibeko/Reuters
The share price traded 0.89 percent higher at R47.43 on the JSE on Tuesday morning. Photo: Siphiwe Sibeko/Reuters

Imperial Group has muscle in spite of expected low growth

By Edward West Time of article published Feb 26, 2020

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CAPE TOWN – Imperial Group anticipates single-digit revenue growth and low double-digit operating profit and headline earnings per share growth in the year to June 2020, in an increasingly challenging trading environment.

The Africa and Europe-focused logistics provider of outsourced, integrated freight management, contract logistics and market access services said at the release of interim results yesterday, however, that cash flow was strong, the balance sheet was sound and there was enough muscle, about R10.6 billion of it, for organic and acquisitive growth.

Yesterday, Imperial chief executive Mohammed Akoojee said: "While the market conditions in most of the geographies we operate in remain tough for the foreseeable future, we remain focused on strategic delivery, good capital management, operational efficiencies and cost control.” A new potential risk was the coronavirus, he added.

“The world relies on China for products such as pharmaceuticals, parts, chemicals and many of our clients are major players in these markets. If stocks run low, particularly in our European operations, we might be affected,” he said.

Imperial lifted headline earnings per share by 10 percent in the six months to December.

Revenue from continuing operations was up 1 percent to R25.4bn, while operating profit from continuing operations increased 9 percent to R1.6bn.

Headline earnings per share from continuing operations increased 10 percent to 371 cents. The interim dividend of 167c cents per share was well up from the 135c in the first half of 2019.

Results benefited from new contract gains as well as the rationalisation and cost-cutting locally and abroad. New business revenue of about R5.8bn a year was secured to the end of December 2019.

This, combined with Imperial’s scale, reach and expertise, would continue to help mitigate against the tough trading conditions in most of the markets where Imperial operates, said Akoojee.

The group’s contract renewal rate on existing contracts was 80 percent, “with an encouraging pipeline of new opportunities".

Four acquisitions were concluded in Africa Regions (R584 million spent in total) in the six months, and a $20m innovation fund had been established.

The sale of the international shipping business was expected to be concluded by June 2020 - subject to regulatory approvals.

Imperial’s activities for continuing operations in Africa produced 55 percent and 67 percent of revenue and operating profit, respectively, with the remainder generated mainly in the Eurozone and UK.

He said manufacturing and industrial production volumes were “massively” down in South Africa, while automotive, chemical and industrial production had also declined in Germany for more than 12 months. Minimal recovery was expected in the short term.

The African Regions business delivered a good performance - maintaining revenue and increasing operating profit.

Citi Investment Research analyst Kgosietsile Rahube said in a note yesterday the African company's growth in the rest of continent was “notably better than expected” and in line with its domestic and other international markets.

Imperial's share price had been under pressure, along with its peers, despite being the only company in the sector reporting growth in earnings, Rahube noted.

The share price traded 0.89 percent higher at R47.43 on the JSE on Tuesday morning.


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