IMPERIAL
INTGRATED
ANNUAL
REPORT 2015
INTEGRATED ANNUAL REPORT 2015
ABOUT OUR
INTEGRATED ANNUAL
REPORT
The Integrated Annual Report corresponds to a period in which leadership redefined the group's business model and clarified the group and divisional strategies to deliver capability-based growth and focused value creation to its stakeholders, in a challenging operating environment.
OUR
BUSINESS
MODEL
The Imperial Group, unlike a conglomerate, operates in two specifically chosen areas of mobility. The group leverages its leadership in its logistics and vehicles value chains to achieve capability-based growth and focused value creation for all stakeholders.
OUR
OPERATING
CONTEXT
Imperial's businesses operate in diverse
geographies, industries and markets
with different socio-economic,
political, regulatory and technological
profiles. The complex interplay of
opportunities and threats within
these environments must be
addressed with strategies
that ensure robust
competitive positions.
OUR STRATEGY
Imperial's strategy seeks to drive capability-based growth and focused value creation through greater strategic clarity and financial discipline at group and divisional level.
The major initiatives that will drive our strategic progress are encapsulated in eight strategic thrusts, which provide a precisely worded set of objectives and guidelines against which management can act and report to the board.
OUR KEY RISKS
Imperial has identified key group-level risk categories in addition to business and industry-specific risks identified by divisions.
OUR
KEY
RELATIONSHIPS
Our stakeholder universe is defined as entities or individuals that may be affected by the organisation's activities, products and/or services, as well as those whose actions can be expected to affect the ability of the group to successfully implement its strategies and achieve its objectives.
OUR
MATERIAL
ISSUES
The group's five material issues are:
We have identified five material issues for the business, which are considered critical to the group's ability to deliver capability-based growth and focused value creation for its stakeholders. These material issues are presented alongside relevant stakeholders and key risks, together with the strategic thrusts they relate to and relevant key activities in the year.
OUR
INVESTMENT
CASE
The refocusing of Imperial's business model and the execution of its strategy will increase management's influence over the group's growth, returns and sustainability in a rapidly changing operating context. Over time this will reduce the disproportionate impact of external factors on the group's prospects and hence its investment case.
CHAIRMAN'S
LETTER TO STAKEHOLDERS
This review, my last as chairman, describes
a year of considerable development and
transformational change for Imperial.
Amid turbulent global and local conditions your group
registered progress in relation to its refocused strategic
objectives and delivered a pleasing financial performance
under the circumstances. The new insights and influences
brought to bear by the direction of a changing board and
the leadership of the CEO in his first full financial year at
the helm, underpinned the progress made.
CHIEF EXECUTIVE
OFFICER'S REPORT
Imperial is a better group today
than it was a year ago.
There is proof of this on many fronts, not least in a stable
operating profit performance despite a consistent
deterioration of the business environment throughout the
year. The group's ability to weather a R558 million fall in
the profitability of our Vehicle Import, Distribution and
Dealerships division due to rand weakness is quantitative
evidence of generally improved strategic, operational and
financial management.
- Watch Mark Lamberti's Video Address -
CHIEF FINANCIAL
OFFICER'S
REPORT
Solid performance and improved balance
sheet and cash flow.
Imperial produced a satisfactory result in challenging
trading environments in all its key markets. All divisions
showed good revenue and operating growth, except the
Logistics International division which was marginally
up on last year and the Vehicle Import, Distribution and
Dealerships division, which declined.
Logistics Africa provides outsourced supply chain management, servicing
the Southern, West and East African markets through three regional hubs.
The division maintains its leading position in the South African logistics and supply chain
industry through reliable and high-quality service delivery, commitment to its clients'
business and innovation to drive improvement. Across sub-Saharan Africa, the division
provides a comprehensive and integrated demand-driven route to market as a
distributor of consumer and pharmaceutical goods.
Based in Germany, Logistics International provides complete logistics
solutions including industrial contract logistics, warehousing, inland
waterway shipping, bulk and container terminal operations, contract
manufacturing in the chemical industry and related value-added
services across European markets.
The division is a leading logistics partner to the automotive, chemical, steel,
aluminium, agriculture, paper and machinery industries. During the year under review,
the division embarked on a strategic restructure of its businesses, which included
consolidating its constituent businesses into two divisional pillars.
The Vehicle Import, Distribution and Dealerships division is an exclusive
importer of 16 automotive and industrial vehicle brands (including
Hyundai, Kia, Renault and Mitsubishi).
The majority of its imported brands are sold through its extensive network of owned
and franchised dealerships in South Africa, which also provide aftersales parts and
servicing and distribute the group’s financial services products. Outside South Africa,
the division distributes and retails vehicles in selected African markets and retails
vehicles in Australia.
The Vehicle Retail, Rental and Aftermarket Parts division’s network
of franchised vehicle dealerships is the largest in South Africa,
representing almost all major brands. Dealerships are also distribution
channels for financial services, insurance, vehicle servicing and parts.
In the commercial sector, the division owns and operates standalone dealerships in
South Africa and the United Kingdom (UK). It also operates two car rental brands in
South Africa (Tempest and Europcar), as well as the largest pre-owned vehicle dealer
network (Auto Pedigree). The division’s panel shops repair vehicles for the rental
fleet, the consumer market and insurance companies, and the aftermarket parts
business wholesales and distributes vehicle parts and accessories. Its leisure
businesses manufacture and sell caravans, canopies and other leisure accessories.
The Financial Services division provides motor-related financial services and products through LiquidCapital (maintenance, warranty and other financial products associated with the automotive market) and vehicle leasing through Imperial Fleet Management and Ariva.
In line with the group’s strategy to dispose of non-core and strategically misaligned assets, negotiations for the sale of Regent are currently underway and progressing positively. Regardless of the outcome of these negotiations, motor-related financial services will remain an integral part of the group’s strategic focus on the full automotive value chain.
The group’s corporate governance structures are
aligned to the principles of the King Code of
Governance Principles (King III).
Governance structures and processes are reviewed from time
to time to accommodate regulatory, strategic and organisational
changes, as well as international developments.
Imperial is sensitive to the global
debate on executive compensation,
where its relationship with
performance is too often tenuous
and coincidental.
At the same time the biggest and most
pressing threat facing South Africa today is
the shortage of skills – we simply have too
few competent managers, leaders,
professionals and technicians to meet our
national requirements. With regard to
executive compensation, Imperial will
strive firstly to ensure that our governance
and disclosure is transparent, and secondly,
that we do not compromise unduly on
performance criteria when external factors
outside our control stifle performance.
