Divisional reports
Logistics
Africa Logistics
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R’million |
2013 |
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2012 |
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Change
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H2
2013 |
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H2
2012 |
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Change
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2012 |
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H1
2013 |
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Change
% on H1
2013 |
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| Revenue |
18 018 |
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16 457 |
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9,5 |
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9 341 |
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8 146 |
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14,7 |
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8 677 |
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7,7 |
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| Operating profit |
920 |
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910 |
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1,1 |
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520 |
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397 |
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31,0 |
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400 |
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30,0 |
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| Operating margin (%) |
5,1 |
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5,5 |
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5,6 |
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4,9 |
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4,6 |
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The Africa Logistics division had an excellent second half and despite a challenging trading environment which included a transport workers’
strike during the first part of the year, the operating profit was in line with the prior year. The Africa business, including CIC, which is involved
in the distribution of FMCG products into many African markets performed well while volumes and rates in our customer base in South Africa,
especially those involved in manufacturing were depressed. If the impact of the strike is eliminated, the division would have been able to
improve its operating margin when compared to the prior year. Acquisitions also contributed positively to the performance.
During the year the division underwent a strategic consolidation process in South Africa. Similar expertise across various businesses was
combined into a number of new units to leverage scale and synergies to drive cost savings and greater efficiency, the benefit of which should
be realised in the new financial year.
The Transport and Warehousing business, which services the manufacturing, mining, commodities and construction industries was under
pressure as a result of industrial action and lower volumes in tough trading conditions. Volumes in the second half were more stable, although
still depressed. The business benefited from management initiatives to right size the business to match market conditions.
Although also impacted by the transport workers’ strike and labour unrest in its client base, the bulk commodity services business performed
well. A 60% shareholding was also acquired in KWS Carriers during the year, a business focused on the movement of bulk commodities from
source to the end users and ports utilising mainly subcontracted vehicles.
The Specialised Freight business performed satisfactorily despite volume pressure in certain products, ie chemicals and food products. The
business gained new contracts during the year. The LTS Kenzam Bulk Transport acquisition was concluded and the operation was integrated into
this division with effect from 1 October 2012.
The Consumer Logistics business was negatively impacted by flat but depressed volumes, mainly in the manufacturing client base. This affected
all businesses in the supply chain, including our warehousing and distribution operations. As a result, management focused on enhancing
efficiencies and reducing costs to drive performance, the benefits of which should be realised in the new financial year. Despite a difficult
trading environment, the business was successful in gaining significant new contracts and the integration of the FMCG and South African
consumer healthcare components of the new Imperial Health Sciences business was successfully implemented. The Cold Chain continues to
impact results negatively as difficult trading conditions persist. This business is being streamlined.
In the rest of Africa businesses, CIC continues to grow and perform well. Transport volumes were also better, especially in our Namibian
businesses. The new Imperial Health Sciences business performed ahead of expectation and will lead to further opportunities to grow the
business across the continent in the pharmaceutical industry. The logistics businesses in rest of Africa increased turnover and operating profit
by 23% and 45% respectively. The acquisition of 49% of MDS Logistics plc in Nigeria was effective from 26 April 2013 and is reported as an
associate. This acquisition provides an excellent platform for further growth in the region and is consistent with our strategy of focusing on
consumer opportunities in Africa and following our customer base on the continent while creating sustainable partnerships in certain markets.
MDS has a quality customer base across a number of industries with a strong new business pipeline.
The Integration Services business had a challenging year due to low activity levels but it continues to make a valuable contribution to the
intellectual capital of the group, specifically by assisting other businesses to expand and integrate client solutions and offer value added services
to their customers.
The net investment in the fleet is lower than the prior year, in line with the scheduled replacement cycle. We incurred gross capital expenditure
of R1 043 million for the year.
International Logistics (EUR)
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€ million |
2013 |
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2012 |
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Change
% |
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H2
2013 |
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H2
2012 |
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Change
% on H2
2012 |
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H1
2013 |
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Change
% on H1
2013 |
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| Revenue |
1 363 |
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1 087 |
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25,4 |
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694 |
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690 |
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0,6 |
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669 |
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3,7 |
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| Operating profit |
66 |
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59 |
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11,9 |
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37 |
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39 |
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(5,1) |
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29 |
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27,6 |
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| Operating margin (%) |
4,8 |
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5,4 |
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5,3 |
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5,7 |
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4,3 |
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International Logistics (ZAR)
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R’million |
2013 |
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2012 |
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Change
% |
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H2
2013 |
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H2
2012 |
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Change
% on H2
2012 |
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H1
2013 |
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Change
% on H1
2013 |
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| Revenue |
15 574 |
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11 247 |
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38,5 |
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8 363 |
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7 088 |
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18,0 |
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7 211 |
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16,0 |
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| Operating profit |
759 |
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598 |
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26,9 |
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452 |
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396 |
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14,1 |
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307 |
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47,2 |
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| Operating margin (%) |
4,9 |
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5,3 |
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5,4 |
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5,6 |
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4,3 |
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The prior year is not directly comparable as the acquisition of Lehnkering was only included for six months. The division had a robust second half
and performed satisfactorily for the year despite tougher trading conditions as a result of a slowing German economy. Transport volumes across
the German inland shipping industry were down and freight rates have been under pressure. Activity levels in certain of our core markets held up
well, namely the chemical industry and the gas shipping market. We also benefited from exports from Germany into markets outside Europe.
The group’s shipping activities, including those of Lehnkering, have been integrated into one unit, namely the Imperial Shipping Group. The
business performed well despite difficult trading conditions where volumes and freight rates were under pressure. To counter this, we gained
business from existing and new customers, managed our costs better and optimised our fleet of contracted vessels.
Lehnkering, which after restructuring our operations, houses all our non- shipping chemical industry logistics activities, including warehousing,
road transport and chemical manufacturing services, experienced normal seasonally low activity levels in the first half and performed much
better in the second half, in line with expectations. The agrochemicals industry typically generates higher revenues in the second half of our
financial year. Lehnkering was affected by once-off charges, mainly in the first half due to corrective action required in certain areas.
Panopa, which provides parts distribution and in-plant logistics services to automotive, machinery, and steel manufacturers performed well
despite a depressed steel market and the slowing European automotive industry. Contract gains and renewals were the main drivers of good
performance. The integration of Lehnkering’s steel and retail contract logistics divisions into Panopa was successfully completed and is
performing in line with expectations.
Neska, the terminal operator, had a more challenging year. Its performance was affected by one client being placed under administration and
another having a fire which disrupted operations at the container terminal in Krefeld. It is expected that the utilisation of the terminal will
improve in the new financial year. The remaining terminals performed in line with expectations.
Gross capital expenditure of R441 million was incurred, up 28% when compared to the prior year, mainly due to the weaker Rand.
Automotive and Industrial
The Automotive and Industrial pillar as fully described above, houses the group’s distribution and retail activities (named Distribution, Retail
and Allied Services); the Automotive Retail division; and the Other Segments division. Other Segments includes Autoparts, Car rental,
Tourism and NAC.
Distribution, Retail and Allied Services
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R’million |
2013 |
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2012 |
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Change
% |
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H2
2013 |
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H2
2012 |
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Change
% on H2
2012 |
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H1
2013 |
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Change
% on H1
2013 |
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| Revenue |
25 682 |
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22 797 |
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12,7 |
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12 654 |
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11 986 |
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5,6 |
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13 028 |
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(2,9) |
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| Operating profit |
2 228 |
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2 121 |
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5,0 |
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1 079 |
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1 124 |
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(4,0) |
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1 149 |
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(6,1) |
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| Operating margin (%) |
8,7 |
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9,3 |
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8,5 |
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9,4 |
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8,8 |
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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 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 and annuity revenue streams generated from
after-sales parts and services. 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 services 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 to retail 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.
Automotive Retail
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R’million |
2013 |
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2012 |
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Change
% |
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H2
2013 |
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H2
2012 |
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Change
% on H2
2012 |
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H1
2013 |
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Change
% on H1
2013 |
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| Revenue |
22 702 |
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19 560 |
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16,1 |
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11 776 |
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9 683 |
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21,6 |
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10 926 |
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7,8 |
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| Operating profit |
651 |
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573 |
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13,6 |
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352 |
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312 |
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12,8 |
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299 |
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17,7 |
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| Operating margin (%) |
2,9 |
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2,9 |
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3,0 |
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3,2 |
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2,7 |
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The division produced a pleasing set of results for the year. Growth in new vehicle retail sales units from South African operations was 10%,
ahead of industry growth. Used vehicle sales also improved by 7,5% compared to the prior year.
Passenger car volumes were strong and were up 9,7% due to a well balanced franchise mix that benefited from a good new model lineup and
growth in the entry-level segment.
Commercial unit vehicle sales (including light commercial) was up 10,7% across all brands in South Africa.
Growth in after-sales service revenue was satisfactory, while parts revenue grew encouragingly as we continue to focus on growing revenue
streams from after-sales activities. The significant increase in new car sales over the last few years bodes well for the future after-sales parts
and services revenue for the division.
In the UK, the division continues to produce good results in a depressed market. The benefit of multi-franchising a number of sites with light
commercial vehicles has paid off well and the recent acquisitions of Watts (a DAF dealer) and Orwell (a Mercedes Benz commercial vehicle
dealer) also contributed positively.
Beekman Canopies continues to perform well and successfully expanded its distribution network during the year. Jurgens Ci was impacted by
industrial action in the second half of the year and produced a mixed set of results. The caravan market also remains muted due to lower
consumer spending on leisure activities in South Africa. The Australian caravan assembly and distribution operations however performed better.
Other Segments
Car Rental
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R’million |
2013 |
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2012 |
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Change
% |
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H2
2013 |
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H2
2012 |
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Change
% on H2
2012 |
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H1
2013 |
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Change
% on H1
2013 |
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| Revenue |
3 608 |
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3 282 |
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9,9 |
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1 902 |
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1 658 |
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14,7 |
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1 706 |
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11,5 |
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| Operating profit |
405 |
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383 |
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5,7 |
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214 |
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185 |
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15,7 |
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191 |
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12,0 |
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| Operating margin (%) |
11,2 |
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11,7 |
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11,3 |
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11,2 |
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11,2 |
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The Tourism businesses were disposed of after the reporting period and are discussed separately below. The above table does not include the
tourism results.
The 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 in the car rental business as revenue days and revenue per day increased by 3% and 1%
respectively. The revenue per day was impacted by the change in mix due to the growth in the replacement business. Revenue per day grew
by 3% if the replacement business is excluded.
Utilisation improved from the first half and was in line with the prior year at 70%. This was achieved despite the increase in the number of
vehicles at the panelshops following the damage caused by hail storms during the year. The average rental fleet size was 3% higher than the
prior year.
Operating margin showed a slight improvement in the second half of the year but was still lower than the prior year as costs increased ahead
of revenue. Accident costs were significantly higher in the car rental business when compared to the prior year.
Auto Pedigree had an excellent year as retail unit sales were higher and the business improved its performance significantly from the prior year.
The panel business improved its performance from the prior year but further corrective actions are being taken by management to strengthen
the business.
Autoparts
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R’million |
2013 |
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2012 |
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Change
% |
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H2
2013 |
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H2
2012 |
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Change
% on H2
2012 |
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H1
2013 |
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Change
% on H1
2013 |
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| Revenue |
4 473 |
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4 134 |
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8,2 |
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2 209 |
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2 043 |
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8,1 |
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2 264 |
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(2,4) |
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| Operating profit |
293 |
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278 |
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5,4 |
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149 |
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138 |
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8,0 |
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144 |
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3,5 |
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| Operating margin (%) |
6,6 |
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6,7 |
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6,7 |
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6,8 |
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6,4 |
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The Autoparts business is being reported separately for the first time. It acts as a wholesaler and distributor of parts and accessories for motor
vehicles that are outside manufacturer warranty and service plans. The division includes Midas, Alert Engine Parts, Turbo Exchange and the
newly acquired Afintapart. The division forms a valuable part of our motor vehicle value chain.
The industry is mature but stable as it is represented by a large national car parc of approximately 10 million vehicles with an average age of
approximately 12 years. During the year, some pressure was also experienced on discretionary products like camping equipment and accessories.
Midas performed satisfactorily in a sluggish and competitive market. In line with the group’s strategy to extend into other areas of parts
distribution, 80% of Afintapart SA (Pty) Limited, a commercial vehicle parts distributor, was acquired by Midas during the year.
Alert Engine Parts performed well while Turbo Exchange was negatively impacted by competitively priced imports.
Geriban, our 30% held associate in Zimbabwe traded well during the year, while NGK in which we own a 25% shareholding performed in line
with the prior year.
NAC and Tourism
Also included in the Other Segments result is NAC, the aircraft distributor and aviation services business which was disposed of during the year
and the Tourism businesses, which were recently announced as being sold, subject to Competition Commission approval.
Financial Services
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R’million |
2013 |
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2012 |
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Change
% |
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H2
2013 |
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H2
2012 |
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Change
% on H2
2012 |
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H1
2013 |
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Change
% on H1
2013 |
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| Insurance |
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| Revenue |
3 287 |
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3 112 |
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5,6 |
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1 628 |
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1 631 |
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(0,2) |
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1 659 |
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(1,9) |
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| Operating profit |
510 |
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|
419 |
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21,7 |
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240 |
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206 |
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16,5 |
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270 |
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(11,1) |
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| Adjusted investment income |
251 |
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175 |
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43,4 |
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100 |
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|
95 |
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5,3 |
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151 |
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(33,8) |
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| Adjusted underwriting result |
259 |
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|
244 |
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6,1 |
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140 |
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111 |
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26,1 |
|
119 |
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17,6 |
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| Operating margin % |
15,5 |
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13,5 |
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14,7 |
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12,6 |
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16,3 |
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| Underwriting margin % |
7,9 |
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7,8 |
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8,6 |
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6,8 |
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7,2 |
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| Other financial services |
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| Revenue |
951 |
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887 |
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7,2 |
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445 |
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535 |
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(16,8) |
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506 |
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(12,1) |
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| Operating profit |
435 |
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356 |
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22,2 |
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214 |
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225 |
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(4,9) |
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221 |
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(3,2) |
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| Operating margin % |
45,7 |
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40,1 |
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48,1 |
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42,1 |
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43,7 |
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| Total financial services |
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| Revenue |
4 238 |
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3 999 |
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6,0 |
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2 073 |
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2 166 |
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(4,3) |
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2 165 |
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(4,2) |
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| Operating profit |
945 |
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775 |
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21,9 |
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454 |
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431 |
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5,3 |
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491 |
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(7,5) |
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| Operating margin (%) |
22,3 |
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19,4 |
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21,9 |
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19,9 |
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22,7 |
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Note: Adjusted underwriting in the above table reflects a reallocation of policyholder investment returns from investment income to the underwriting result.
The Financial Services pillar had an excellent year.
Insurance
The insurance underwriting performance was much improved in the second half and despite a deteriorating claims experience in the short-term
motor class, it was up 6% on the prior year and generated an adjusted underwriting margin of 7,9% for the year. As part of its strategy to focus
on its core markets and distribution channels, Regent exited certain non-performing classes of business, which had not been generating
adequate returns for some time. These made up less than 10% of its revenue but had a significant negative impact on underwriting performance.
Regent’s other significant product lines in the short-term insurance business delivered excellent results and showed healthy growth from the
prior year.
Regent Life performed well, with gross written premiums up 15% for the year, although the economic assumption changes impacted the
underwriting result negatively in the second half.
Investment returns were higher than the prior year as a result of a larger exposure to equity markets, which performed favourably when
compared to the prior year. The second half was however, more challenging as equity markets were more volatile.
Botswana and Lesotho continue to grow and the exposure to other African countries is becoming a more meaningful contributor to the division.
Other Financial Services
Other Financial Services, mainly represented by LiquidCapital performed well. The joint venture profits with financial institutions were however,
negatively impacted by more conservative impairment assumptions in the second half; in line with expectations and current market conditions.
The advances book generated through these joint ventures has however, grown encouragingly, as have the funds held under service,
maintenance plans, warranties and roadside assistance. Innovation of new products, improving retention and penetration rates in our sales
channels also contributed positively to the growth in these businesses. This provides a valuable annuity earnings underpin to our future profits.
Volumes in Imperial Fleet Management continue improving as we gain new contracts. Ariva, a personal leasing joint venture with JD Group is
performing in line with expectations and presents growth potential in a largely untapped market.
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