Manny da Canha CEO of Distribution, Retail and Allied Services

Overview of operating units

Overview of operating units
Distribution, Retail and Allied Services
Vehicle Distribution and Allied Services		This unit imports and distributes a number of motor vehicle and motor cycle brands to a dealer network through approximately 117 owned and a number of independent dealers across South Africa. Motor vehicle brands include Hyundai, Kia, Daihatsu, Mitsubishi, Tata, Lamborghini, Bentley, Lotus and Proton. A well-established retail network facilitates a comprehensive after-sales service that includes financial services, vehicle services, parts supply and accessories. The division also imports Kawasaki, Aprilla and Triumph motorcycles and related accessories. Datadot installs micro dots used in the detection of motor vehicle theft and are also used to identify and protect motor cycles, trailers, marine craft, home, business and personal assets. Outdoor media company, Graffiti, specialises in vehicle and truck branding and a range of wrapping solutions for the advertising industry. We have invested in electronic and technology support services to support the enhancement of the dealership business into the future.
Industrial Distribution		This division is aligned to Imperial’s strategy of growing its business in other industries that complement its existing distribution expertise. It includes the Goscor Group, which imports, distributes and rents forklifts, cherry pickers and cleaning equipment, tooling, and powered products, and provides after-sales parts and services for a range of represented brands. Its brands include Crown, Bendi, Doosan, Tenant and now Genie. Bobcat, a leading supplier of compact equipment into the construction, mining and agricultural sectors complements our existing offering of quality products and after-sales service. Segway imports and distributes electric personal transporters. E-Z-GO, a distributor of golf carts, is also housed in this division. Its market includes golf courses and estates, on 40% of which its carts are currently used, as well as the healthcare and hospitality industries.
Associates and joint ventures		Through agreements with Renault SAS France, we distribute Renault motor vehicles with the Bidvest Group, we distribute Chery/Foton motor vehicles.
Australian Dealerships		Through the Australian Dealerships, Imperial has five Ford dealerships in Sydney, Australia, a Ford parts distribution centre and a Mitsubishi dealership in Sydney, Australia.

Risks, opportunities and performance drivers
Risks		Opportunities		Performance drivers
Sustained Rand weakness		Expansion of parts and vehicle distribution into Africa		Vehicle sales
Interest rate increases		After-sales parts and service revenue streams flowing from the brands we represent		Market share
Availability of consumer credit		Optimise positioning in motor value chain		Overhead absorption rates
Increased competition		Growth in the private vehicle leasing market		Contribution in revenue from sales parts and service capital management
Reliance on key distribution relationships
Regulatory constraints and impact on business

Results

R million	2013			2012		Change %		H2 2013			H2 2012		Change % on H2 2013		H1 2013		Change % on H1 2013
Revenue	25 682			22 797		12,7		12 654			11 986		5,6		13 028		(2,9)
Operating profit	2 228			2 121		5,0		1 079			1 124		(4,0)		1 149		(6,1)
Operating margin (%)	8,7			9,3				8,5			9,4				8,8

	2013			2012
Return on invested capital (%)	21,5			19,8
WACC	9,0			10,1

The division performed satisfactorily considering some of the challenges faced by it during the year. These include a weakening currency, lack of stock availability from our principals in South Korea and a more competitive market. Excluding the Australian operation, new vehicle registrations as reported to NAAMSA by Associated Motor Holdings (AMH), Amalgamated Automobile Distributors (AAD), TATA and Mitsubishi were 1,2% higher, compared to a market increase of 7,6%. Strong growth was experienced in used car sales and annuity revenue streams generated from after-sales parts and service. Revenue from rendering of services was up 24% for the year. The growing vehicle parc of our imported brands is securing good levels of after-market activity for its dealerships, which are performing better.

Vehicle distribution margins declined as a result of a weaker Rand, stock shortages and more competition. Forward exchange contracts and price increases enabled us to manage the impact of the volatile currency throughout the year. The strong growth in used car sales and after-sales parts and service also provided a valuable underpin to the division’s operating margin and profit.

The Goscor Group which distributes industrial products, had an excellent year with strong growth experienced in the forklift and access equipment businesses. The cleaning equipment business performed satisfactorily while Bobcat, which supplies compact equipment into the construction, mining and agricultural sectors had a challenging year.

The businesses that complement and are allied to our motor-related activities which include Car Find, Bid 4 Cars and Datadot, continue to perform well.

In Australia, new and used retail unit sales were down 5% and 11% respectively. The dealerships in Australia had to realign their business to focus on selling more vehicles to retail customers and less to rental companies, which impacted volumes negatively. Ford has a strong line-up of vehicles in Australia and the business is expected to improve.