Chief executive officer's and chief financial officer's review

Financial highlights and milestones Revenue 14% higher at R92 382 million Operating profit improved 8% to R6 087 million HEPS up 15% to 1 804 cents Core EPS up 15% to 1 871 cents Free cash conversion ratio of 106% (based on headline earnings) Full-year dividend of 820 cents per share up 21% ROE of 23% (based on core earnings) Invested R175 million in people development Reached transformation milestone with 50% black managers Net debt to equity 52%

Hubert Brody, chief executive officer Osman Arbee, chief financial officer

Imperial achieved a pleasing result for its 2013 financial year. All divisions achieved operating profit growth as the portfolio proved to be resilient amid challenging trading conditions in South Africa and Europe.

The group made good progress during the year in enhancing its portfolio of businesses by exiting sub-scale operations, consolidating certain aspects of its South African Logistics business, and adding areas of strategic growth that will maximise returns for our shareholders.

Our overarching strategic objective is to drive the improvement of returns on capital, as this is the ultimate generator of value for our shareholders. In line with this objective, the group achieved a return on invested capital (ROIC) of 16,2% for the year against a weighted average cost of capital (WACC) of 8,8%. Our target is to achieve a ROIC of 4% above WACC through the cycles.

The group is continuously seeking growth opportunities in and adjacent to existing industries and geographies. In this respect we have benefited from a full-year contribution of Lehnkering and a six-month contribution from the pharmaceutical logistics-related acquisition of Imperial Health Sciences (previously RTT Health Sciences), which performed ahead of expectation. The integration of Lehnkering took place smoothly which is positive given the size of the business. The transaction has established Imperial’s presence in the highly sophisticated area of chemical logistics and related services. Chemical and pharmaceutical logistics are two promising areas of business due to the high levels of sophistication which is required from us by our clients, creating long-lasting, value-adding relationships.

Operating profit generated in Africa outside South Africa rose by 33% to R397 million and has doubled over the last three years. Operating profit from international activities (outside of South Africa) increased to 21% of the group result from 17% in 2012.

Following the disposal of sub-scale operations as noted later in this report and in line with our strategy of focusing on our core industries: namely, logistics; distribution of automotive and industrial products; automotive retailing and financial services, the group has now clustered its businesses into three main pillars as described in the group structure on page 14.

These three main pillars have reporting segments allocated to them. This reflects the changes to the executive management and how the chief decision-making body, being the executive committee, manages the business units within the group.

Business conditions in Imperial’s markets

The new vehicle market was favourable during the year, growing in South Africa by 7,6%. Good credit availability, improved affordability and continued low interest rates underpinned the growth in the vehicle market. The used car market also improved during the year as a result of new vehicle price inflation.

Industrial action impacted the group during the year and could affect the group from time to time. Supply from South Korea was disrupted by strike action and shortened work hours at the Hyundai and Kia plants. In South Africa, the national transport industry strike in the last week of September 2012 and first two weeks of October 2012 significantly curtailed our ability to service our South African transport customers.

In the Africa Logistics division, trading conditions in the South African market were challenging. The manufacturing sectors of the South African economy struggled to gain momentum, which impacted on a number of our businesses, and certain segments of the retail sector experienced pressure.

The consumer market across many other African countries continued to grow with the increase in the size of the emerging middle class, particularly in those sectors in which our African Logistics businesses have chosen to focus, namely FMCG and pharmaceutical products.

In Germany, we experienced tough market conditions due to the slowdown in the European economy. Transport volumes were depressed, although activity levels in the chemical industry and gas shipping market held up well. We also benefited from the German exports into growing markets outside Europe.

Competitive trading conditions persisted in the car rental market where rental rates remain under pressure. The impact of a change in revenue mix (increase in insurance replacement business), higher accident costs and hail storms during the year had an adverse impact on operating margins.

The autoparts industry is mature and competitive but stable. As a result, we experienced competitive pressures and a decline in consumer spending on discretionary products, like camping equipment and accessories, which impacted us negatively.

The current cycle in the motor industry favours our Financial Services pillar. New business growth was driven off the back of an increase in vehicle sales in a favourable new car market.

Insurance underwriting conditions in the short-term insurance industry were more challenging, with two large hailstorms having a negative impact during the year. The termination of certain lossmaking books of business, however, contributed positively, resulting in underwriting margins being in line with the prior year. Equity markets were favourable and investment returns higher.

Vehicle sales

In South Africa, the group sold 123 737 new and 63 266 used vehicles in the year, respectively 2,9% and 7,9% more than the prior year. The national new vehicle market grew by 7,6% year on year for the 12-month period to June 2013, according to NAAMSA.

The Australian and United Kingdom operations sold 10 854 new vehicles, which was in line with the prior year, and 4 346 used vehicles which was 4,3% lower.

Overview of results

Summarised profit or loss

for the year ended 30 June	2013 Rm			2012 Rm		% change
Revenue	92 382			80 830		14
Operating profit	6 087			5 638		8
Recoupments from sale of properties net of impairments	8			(32)
Amortisation of intangible assets arising on business combinations	(254)			(128)
Foreign exchange gains/(losses) and forex derivatives	24			(10)
Remeasurement of contingent considerations	66
Realised gain on disposal of available-for-sale investment	10
Business acquisition costs	(15)			(51)
Exceptional items	(178)			(12)
Net finance cost	(744)			(681)		9
Income from associate and joint ventures	86			46		87
Income tax expense	(1 404)			(1 382)		2
Net profit for the year	3 686			3 388		9
Attributable to owners of Imperial	3 294			2 980		11
Attributable to non-controlling interests	392			408		(4)

Revenue		Operating profit

Revenue was 14% higher at R92,4 billion and operating profit increased by 8% to R6,1 billion. Core EPS improved by 15%. The return on equity was 23%.

Divisional split of revenue and operating profit

for the year ended 30 June	2013 Rm			2012 Rm		% change
Revenue
Logistics	33 592			27 704		21
Africa (including South Africa)	18 018			16 457		9
International	15 574			11 247		38
Automotive and Industrial	57 577			51 679		11
Distribution, Retail and Allied Services	25 682			22 797		13
Automotive Retail	22 702			19 560		16
Other Segments	9 193			9 322		(1)
Financial Services	4 238			3 999		6
Insurance	3 287			3 112		6
Other Financial Services	951			887		7
Head Office and Eliminations	(3 025)			(2 552)
Group	92 382			80 830		14
Operating profit
Logistics	1 679			1 508		11
Africa (including South Africa)	920			910		1
International	759			598		27
Automotive and Industrial	3 578			3 409		5
Distribution, Retail and Allied Services	2 228			2 121		5
Automotive Retail	651			573		14
Other Segments	699			715		(2)
Financial Services	945			775		22
Insurance	510			419		22
Other Financial Services	435			356		22
Head Office and Eliminations	(115)			(54)
Group	6 087			5 638		8
Operating margin (%)
Logistics	5,0			5,4
Africa (including South Africa)	5,1			5,5
International	4,9			5,3
Automotive and Industrial	6,2			6,6
Distribution, Retail and Allied Services	8,7			9,3
Automotive Retail	2,9			2,9
Other Segments	7,6			7,7
Financial Services	22,3			19,4
Insurance	15,5			13,5
Other Financial Services	45,7			40,1
Group	6,6			7,0

Operating margin

The Logistics pillar had an excellent second half and revenue and operating profit increased by 21% and 11% respectively, for the year.

The newly named Africa Logistics division (which includes South Africa) was negatively impacted by the transport workers’ strike during the first half of the year and a struggling South African economy, especially in the manufacturing sector. The Logistics businesses in the rest of Africa, which are involved in the distribution of FMCG and pharmaceutical products, performed well.

The International Logistics division had to contend with a slowing European economy during the year but was operationally well managed in an environment where activity levels in some of its core markets were under pressure. This business also benefits from exports from Germany into stronger markets outside Europe.

The Automotive and Industrial pillar performed satisfactorily and each division within this pillar delivering growth. Revenue and operating profit in this pillar were up 11% and 5%, respectively.

The Distribution, Retail and Allied Services division performed satisfactorily considering some of the challenges faced by it during the year. These include a weakening currency, lack of stock availability on certain products from our principals in South Korea and a more competitive market. Revenue and operating profit was up 13% and 5% respectively.

The Automotive Retail division, which represents products of locally based original equipment manufacturers (OEMs) and is therefore not involved in the importation of vehicles, had an excellent year, with revenue and operating profit up 16% and 14% respectively.

Other Segments are down on both revenue and operating profit which was impacted by NAC being sold during 2013.

The Car Rental business had a very good second half and achieved a satisfactory result for the year, despite tough trading conditions in the car rental industry. Revenue growth was encouraging as both revenue days and revenue per day grew. Utilisation also improved from the first half and Auto Pedigree had an excellent year. Revenue and operating profit were up 10% and 6% respectively.

The Autoparts business, which forms a valuable part of our motor value chain, includes Midas, Alert Engine Parts, Turbo Exchange and the newly acquired Afintapart. Midas performed satisfactorily in a sluggish and competitive market. Alert, the engine parts business, performed well, while Turbo exchange was negatively impacted by competitively priced imports. Revenue and operating profit were up 8% and 5% respectively.

The Financial Services pillar had an excellent year, achieving operating profit growth of 22%.

Revenue in the Insurance division improved by 6% and investment income was higher than in the prior year arising from more favourable equity markets. The underwriting margin was in line with the prior year at 7,9% and improved strongly in the second half to 8,6%. This performance was satisfactory considering the high claims (arising from hail damage) that affected the short-term insurance industry during the year. The life insurance unit grew premium income by 15% while the rest of Africa insurance businesses continue to show good growth.

Operating profit from the Other Financial Services division, which is mainly represented by LiquidCapital, grew by 22%. The growth was driven by the strong annuity income streams that flow from the service and maintenance plans, vehicle financing alliances and a growing range of value added financial products sold within this division.

The group operating margin reduced from 7,0% to 6,6%. This was caused by the reduced margins experienced in the Automotive and Industrial, and Logistics pillars. The Distribution, Retail and Allied Services division achieved an operating margin of 8,7% against 9,3% in the prior year. This decline was mainly caused by the aforementioned supply disruptions, the weakening of the Rand and a more competitive market. Automotive Retail maintained its margin at 2,9%. The margin in the Logistics pillar improved significantly in the second half but was lower than the prior year at 5,0% against 5,4%. This was primarily due to the transport workers’ strike in South Africa during the first half and challenging trading conditions experienced in both the South African and International Logistics divisions during the year.

In aggregate, the group’s operating profit grew by 8%, and core earnings per share (core EPS) increased by 15%.

Net finance costs increased by 9% to R744 million on higher debt mainly incurred to fund the expansion of the group. Despite the higher net finance costs, interest covered by operating profit remains healthy at 8.2 times (2012: 8.3 times).

Income from associates showed an increase of 87%. Mix Telematics, in which Imperial holds a 29% interest, performed well and contributed R39 million (2012: R31 million). MDS Logistics plc, the Nigerian Logistics business, in which we acquired a 49% shareholding effective 26 April 2013, made a positive contribution for two months of this year. Ukhamba also performed better due to the reversal of an impairment in the current year of its investment in Distribution and Warehousing Network Limited (DAWN).

The group benefited from a lower effective tax rate of 28,1% compared to 29.3% in the prior year. This was mainly due to the saving of STC, which is no longer applicable.

Earnings attributable to non-controlling interests reduced from R408 million to R392 million. This was mainly due to the sale of businesses with minorities, the impact of the strike and an amount of R17 million that was reversed which had been provided for in the prior year.

The table below summarises the reconciliation from earnings to core earnings.

for the year ended 30 June	2013 Rm			2012 Rm		% change
Earning attributable to owners of Imperial	3 294			2 980		11
Profit on disposal of assets	(41)			(29)
Impairment of assets	27			49
Exceptional items	164			31
Realised gain on disposal of available-for-sale investments	(10)			(19)
Amortisation of intangible assets arising on business combinations	254			128
Business acquisition costs	15			51
Remeasurement of contingent considerations	(66)
Headline earnings from discontinued operations				(34)
Other adjustments	6			(2)
Tax effects	(59)			(38)
Core earnings	3 584			3 117		15

Financial position and cash flow

Summarised statement of financial position

at 30 June	2013 Rm			2012 Rm
ASSETS
Goodwill and intangible assets	5 206			4 234
Investment in associates and joint ventures	1 317			889
Property, plant and equipment	9 257			8 080
Transport fleet and vehicles for hire	7 091			6 657
Non-current financial assets, investments and loans	3 445			2 675
Net working capital	6 158			4 607
Cash resources	1 844			3 545
Assets classified as held for sale	94
	34 412			30 687
EQUITY AND LIABILITIES
Capital and reserves
Attributable to owners of Imperial	16 413			14 666
Non-controlling interests	1 300			1 223
Total equity	17 713			15 889
Liabilities
Non-redeemable, non-participating preference shares	441			441
Retirement benefit obligations	757			590
Interest-bearing borrowings	10 568			9 747
Insurance, investment, maintenance and warranty contracts	3 970			3 222
Net deferred tax liabilities	484			177
Non-current financial liabilities	419			348
Net current tax liabilities	14			273
Liabilities directly associated with assets classified as held for sale	46
	16 699			14 798
Equity and liabilities	34 412			30 687

Total assets increased due to acquisitions, translation effects of a weaker Rand, organic growth and expansion of existing businesses.

Goodwill and intangible assets rose to R5,2 billion from R4,2 billion mainly as a result of the RTT Health Sciences acquisition and translation effects of a weaker Rand.

Investment in associates increased to R1,3 billion (2012: R889 million) mainly due to the acquisition of 49% of MDS Logistics, a Nigerian Logistics business providing integrated supply chain and logistics solutions.

Property, plant and equipment increased by R1,2 billion due acquisition of land and buildings in the Logistics, Automotive Retail and Distribution, Retail and Allied Services divisions and the impact of foreign exchange translation.

Net working capital increased by 34% from the prior year due to acquisitions, foreign exchange translation differences and a much improved inventory position in the Distribution, Retail and Allied Services and Automotive Retail divisions compared to the prior year. We are now optimally stocked in these divisions. As a result, our net working capital turn reduced to 17,2 times from 20,6 times in the prior year.

Assets and liabilities held-for-sale are for the Tourism division.

Net debt to equity (excluding preference shares) at 49% was higher than the prior year (39%). This was mainly due to acquisitions, expansion of existing businesses and share buybacks amounting to R742 million during the year. Translation of our foreign debt due to a weaker Rand also impacted on our debt level at year-end. The net debt level is below the target gearing range of 60% to 80% and still leaves significant room for further expansion of the group.

The group’s Euro bond (€236 million) matured and was partly refinanced during the year. A new bond (IPL 7) amounting to R750 million was issued in South Africa and a combination of cash and existing facilities was used to repay the balance of the Euro bond.

R5,0 billion of our total debt amounting to R10,6 billion matures in the next 12 months including IPL4 which is due to be repaid in March 2014. R2,3 billion is repayable between July 2014 and June 2017. R3,4 billion is repayable after five years. 56% of our total debt is at fixed interest rates. The group’s liquidity position is strong with R5,9 billion in unutilised facilities.

Moody’s has maintained the investment grade issuer credit ratings for Imperial Group Limited and the bonds outstanding under its DMTN and commercial paper programmes. The ratings are as follows:

Certain bank facilities as well as the Euro-syndicated loan facility have a debt covenant of net debt/EBITDA of 3.5:1. In addition, the Euro-syndicated loan facility has an additional covenant that requires the net debt/EBITDA ratio of Imperial Group Limited to be higher than that of Imperial Holdings Limited. As at the reporting period both these ratios were well within the required levels.

New business written on service, maintenance and warranty contracts generated by the Financial Services division resulted in insurance, investment, maintenance and warranty contracts growing to R4,0 billion, up 23% from the prior year (2012: R3,2 billion).

Shareholders’ equity increased due to higher retained income and the weakening of the Rand which resulted in gains on the foreign currency translation reserve of
R731 million accounted for in the statement of comprehensive income. This was offset by dividends of R1 478 million and by R742 million utilised for the repurchase and cancellation of 4,0 million shares in the open market.

Summarised statement of cash flows

for the year ended 30 June	2013 Rm			2012 Rm		% change
Cash generated by operations before movements in net working capital	8 795			8 198		7
Movements in net working capital	(1 604)			(758)
Cash generated by operation before capital expenditure on rental assets	7 191			7 440		(3)
Net finance cost and tax paid	(2 138)			(2 203)		(3)
Cash flows from operating activities before capital expenditure on rental assets	5 053			5 237		(4)
Dividend received from Ukhamba Holdings (Pty) Limited				387
Net acquisition of subsidiaries and business	(539)			(1 868)
Expansion capital expenditures – including rental assets	(1 682)			(1 125)
Net replacement capital expenditure – including rental assets	(1 395)			(1 467)
Net movement in other associates and joint ventures	(321)			(94)
Net movement in equities and loans	(771)			(63)
Ordinary share repurchase and cancelled	(742)
Dividends paid	(1 755)			(1 350)
Cash flows from financing activities	(98)			(282)
Net increase in debt	(2 250)			(625)
Free cash flow	3 658			3 770
Free cash conversion to headline earnings (%)	106			125

Cash generated by operations before capital expenditure on rental assets was 3% lower than the prior year at R7,2 billion. After financing costs and tax payments net cash flow from operating activities decreased to R5,1 billion, down R184 million when compared to the prior year. This was mainly due to a higher absorption of cash by working capital compared to the prior year, as our inventory position in the Distribution, Retail and Allied Services division increased as we secured more vehicle inventory from our South Korean suppliers.

Net replacement and expansion capital expenditure excluding car rental vehicles, was 25% higher than the prior year facilitating the expansion of the group. A net R539 million was spent on acquisitions during the year, as detailed below. We made further investments in associates of R321 million, the major reason being the acquisition of 49% of MDS Logistics plc, a Nigerian Logistics business.

Cash flows from investing activities were impacted by our Insurance business increasing its exposure to equity markets and investing its cash into longer-term deposits which benefited the group through good investment returns.

Under financing activities, the Euro bond matured and was replaced by a new bond (IPL 7) amounting to R750 million and other shortterm debt. Four million Imperial shares worth R742 million were repurchased in the open market during the year and dividends paid increased from R1,4 billion to R1,8 billion.

Net debt/equity*		Return on equity

Ordinary dividend

A final ordinary dividend of 440 cents per share (2012: 380 cents per share) has been declared. This brings the full dividend for the year to 820 cents per share (2012: 680 cents per share), which is up 21% compared to the prior year.

Acquisitions and disposals during the year

Acquisitions during the year consisted of:

The group continues to focus on the strategic fit and returns of its businesses. As a result, the following disposals were made:

Strategic intentions

Our overarching strategic objective is to achieve improving returns on capital, as this is the ultimate generator of value for our shareholders. To deliver on this objective, the group is continuously seeking capital-efficient growth opportunities in and adjacent to existing industries and geographies.

The main area of Imperial’s future growth will be in the logistics industry and certain areas of product distribution. In Africa, outside of South Africa we will place specific focus on consumer-related logistics and distribution, while our European logistics operations will expand around existing themes, and if the correct opportunities arise, will follow its customers globally.

The group has developed significant expertise in the distribution of products which carry strong brands, particularly related to automotive and industrial products, and more recently subsequent to the acquisition of CIC, of consumer products in certain African countries. We will continue pursuing similar opportunities as they have proven to be value enhancing to our portfolio and the group’s earnings.

Imperial’s deep involvement in virtually all aspects of the automotive value chain provides us with a competitive advantage in this market while generating the cash needed to grow our operations in areas that offer good growth prospects and will maximise returns to our shareholders in future. We also continue to focus on further improving the returns of automotive businesses that are not achieving our target returns on invested capital, for example our car rental operations.

Our strategy is therefore centred on generating cash in the automotive business to grow the logistics operations, while still continually pursuing opportunities to enrich our involvement in the automotive value chain.

Performance against previous commitments
Management commitment		Performance
Deliver shareholder value through capital management, sustainable returns, cash generation and growth		– Return on equity = 23% – Return on invested capital = 16% – Core EPS growth = 15% – Free cash conversion ratio =106% – Dividend per share up 21% – Share buy backs of R742 million
Acquisitive growth in logistics in our core geographies		Africa Logistics acquired: – 100% of the pharmaceutical distribution and healthcare supply chain services business conducted by RTT Group (Pty) Limited (RTT Health Sciences) – 60% of LTS Kenzam (Pty) Limited, a Logistics business that distributes bituminous products throughout Southern Africa – 60% of KWS Carriers (Pty) Limited, a business focused on the movement of large volumes of bulk commodities – 49% of MDS Logistics plc, a Nigerian Logistics business, providing integrated supply chain and logistics solutions
Retain focus on becoming a more asset light returns focused organisation		– Disposed of our shareholding in NAC, the aircraft distributor and aviation services business – Disposed of our shareholding in Megafreight, a freight forwarding business – After the reporting date, disposed of the Tourism division, subject to approval by the Competition Commission
Expansion of our footprint in the African continent		– Acquired RTT Health Sciences, establishing our presence in the pharmaceutical supply chain industry in Africa – Acquired 49% of MDS Logistics plc, allowing us entry to the Nigerian logistics sector
Expand our Distributorships division into the distribution of products which carry strong brands in industrial markets		– Acquired Afintapart SA (Pty) Limited, a commercial vehicle parts distributor
Grow the annuity revenue streams that arise from a growing vehicle parc in the brands we exclusively distribute		– Revenue from the rendering of services in Distribution, Retail and Allied Services up 24%
Grow annuity earnings in Other Financial Services on the back of new business being placed on its book in the current strong vehicle sales cycle		– Operating profit in Other Financial Services up 22%
Invest in our people and their development		– Investment of R175 million in training and development (2012: R171 million) – Expanded our artisan and technician training centres to include two new facilities, which increases our annual training capacity to 1400 artisans – Our Car Rental division also opened its new state-of-the-art Europcar Learning Centre, which will continue hosting the training of its employees
Ongoing focus on reducing our environmental impact		– Implemented a comprehensive group-wide system to measure non-financial sustainability information – We have installed waterless car wash facilities in our dealerships, which has significantly reduced the amount of water used to wash a car – We built the first solar powered Kia dealership in the world here in South Africa – We built an environmentally friendly state-of-the-art UD trucks dealership in Pretoria – A number of businesses continued to implement energy and water saving initiatives during the year, including the installation of energy efficient lighting, dust and noise pollution reduction measures and water treatment and recycling projects
Focus on road safety		– We have over 135 000 individuals committed to being part of a movement towards safer roads in South Africa by taking the IMPERIAL I-Pledge as part of our group’s extensive road safety campaign – We continued to partner with toll concessionaires during the holiday season by putting at their disposal nine vehicles primarily to bolster route surveillance, patrol support and post-crash care activities – The Scholar Patrol Improvement Project is training educators and scholar patrollers, road markings are being refurbished and signage erected, and we donate scholar patrol equipment and high-visibility bibs and caps – Scholar patrol initiative has to date refurbished equipment for 215 school scholar patrols and reached over 142 000 primary school learners in road safety awareness

Non-financial performance at a glance

for the year ended 30 June	2013 Rm			2012 Rm
People employed	51 007			47 699
Salaries paid (Rm)	12 824			10 703
Training expenditure (Rm)	175			171
Donations to social responsibility causes (Rm)	42			46
Distance travelled by our road fleet excluding rental vehicles (million kilometres)	495			487
Employee fatalities	9			10
Volume spillages (kilolitres)	84,62			115,43
Electricity purchased (million kW/h)	209			164
Fuel consumed (million litres)	271			271
Biofuel consumed (million litres)	0,23			0,25
CO2 emissions (tonnes)	1 182 534			1 072 636

Building a robust skills pipeline

We recognise that skilled people offer the business a powerful competitive advantage, particularly in a global environment of critical skills shortages, and skills development is therefore a key business driver across Imperial’s many diverse operations. We invested R175 million in various training initiatives during the year.

These include our ongoing artisan and technician training programmes, which trained 770 apprentices within the marketplace during the year. We have by the expansion of our academies, increased our annual intake capacity to 1 400 apprentices. These are more apprentices than our businesses can absorb, but we have taken the long-term view that investment in the overall upliftment of the country’s technical skills can only be good for the country and our business.

The Imperial Technical Training Academy (ITTA) brand is becoming a recognised and reliable service provider to the industry and is now acknowledged as an industry benchmark. ITTA promoted “The Year of the Artisan” in line with a call by Minister Blade Nzimande for closer collaboration between industry, education, Further Education and Training Colleges (FETs) and government. It established a number of critical initiatives signifying promising cooperation between the roleplayers.

We also continued to invest in management development programmes to grow young talent into management positions, in line with our transformation strategy and our approach to promoting from within the business. These programmes are working well in building a robust succession pipeline.

Investing in communities

The Imperial and Ukhamba Community Development Trust expanded its programme to 10 beneficiary schools during the year, with a focus on leveraging school libraries to enhance the literacy levels among learners in the foundation phase.

The Trust has a long history of establishing libraries at beneficiary schools but this year took the library programme a step further by training up librarians to permanently staff the school libraries. This has been coupled with intense reading programmes for learners and has increased utilisation of the libraries at all our schools. Some 10 000 learners now benefit from the Trust’s programme.

Appreciation

The ongoing success of Imperial relies on the commitment, talent and energy of our people, to whom we would like to extend our gratitude on behalf of management and the board.

We are also grateful to our business partners, suppliers and customers for continuing to support us during the year.

We would like to extend a special note of thanks to Hafiz Mahomed who retired as director, effective 30 June 2013. Hafiz joined the group as financial manager in 1982 and was appointed to the board in March 1992. He has played an instrumental and key role in our success over 30 years of dedicated service and we wish him well in his retirement.

He will remain in the employ of the group until the end of 2013 in order to ensure a seamless handover of his responsibilities to his successor, Osman Arbee.

Prospects

Imperial’s financial position remains strong despite significant organic and acquisitive growth and share buy-backs in the recent past.

In South Africa, we expect trading conditions in the logistics industry to remain challenging, driven by a weak economy especially in the manufacturing sector. As a result, the division underwent a strategic consolidation process, which positions it well to be more competitive and cost effective in a tough market. We expect the benefits of this process to be realised in the 2014 financial year. Prospects in the rest of Africa are good, as our expansion into the continent continues gaining momentum, especially in consumer markets. CIC together with the new acquisitions of RTT Health Sciences (now Imperial Health Services) and MDS Logistics plc Nigeria, provide the ideal platform to take advantage of growth opportunities in these markets.

Imperial Logistics International remains well positioned in attractive niches in the German logistics industry. Despite the tough economic conditions in Europe, we are positive about the division’s prospects and its ability to show growth due to its positioning and the industries it serves. We will continue to follow our customers who are entering new markets and potential acquisitions will be a growth driver.

We anticipate tougher trading conditions in the new motor vehicle market during the year ahead. Reduced disposable income, a weaker currency and the high base created by strong volume gains in the last four years all present headwinds for growth. While our inventory position has improved, we expect the market to be more competitive as market conditions get tougher. The weaker local currency will impact new car margins, prices and ultimately demand. As a result of new vehicle price increases, the used car market should improve further and after-sales parts and service revenues will continue to benefit from the increase in the installed base of vehicles, especially in the brands we represent.

Conditions in the Car Rental business are expected to remain competitive. Auto Pedigree should continue benefiting from the improving used car market.

The Autoparts business is not affected directly by new vehicle sales and despite an increasingly competitive market we should continue to perform solidly as initiatives to expand its product range and geographic footprint bear fruit.

In the year ahead Regent will focus on improving its underwriting result, which will be supported by its recent exit from underperforming insurance product lines. Our investment portfolio will continue to be prudently managed and while we cannot predict the performance of investment markets and our investment returns, we are confident that our underwriting performance will improve in the year ahead.

The rate of growth in the underlying books of business in LiquidCapital will be impacted by slower growth in the new vehicle market. However, its financial performance will be underpinned by the strong annuity revenue streams that flow from the installed base of business it has generated in the last few years.

While it will be difficult to achieve meaningful growth under current market conditions in the 2014 financial year, the group is well positioned to take advantage of organic growth and acquisition opportunities.