Financial performance

R million HY1
  % change   HY2
  % change
on HY2
Revenue 51 357   56 234   9   52 210   8  
Operating profit 3 166   2 872   (9)   3 019   (5)  
Operating margin (%) 6,2   5,1       5,8      


Revenue increased 9% to R56,2 billion. Excluding acquisitions, revenue increased 1%.

The Group operating margin reduced from 6.2% to 5.1% mainly as a result of the R473 million decline in the Vehicle Import, Distribution and Dealership division’s operating profit.

In aggregate, the Group’s operating profit declined by 9%.

Net finance costs increased 42% to R598 million on higher debt levels and higher funding costs due to the lengthening in maturity of our debt profile. Despite the higher net finance costs, interest covered by operating profit remains good at 4,8 times (2014: 7,5 times).

Income from associates and joint ventures contributed R12 million (2014: R18 million) and declined mainly due to the negative performance of Ukhamba, a result of the impairment of its investment in DAWN (R19 million). AAD, the joint venture through which we import and distribute Chery and Foton products (Chinese automotive brands), was under pressure and significantly down on the comparable period. Mix Telematics, in which Imperial holds a 25,3% shareholding, contributed R15 million, up 17% from the comparable period.

The effective tax rate of 26,2% compared to 26,5% in the comparable period.

Net profit attributable to non-controlling interests (minorities) reduced from R197 million to R168 million. The increase in minorities as a result of the recent acquisitions was more than offset by significantly lower profits from the Vehicle Import, Distribution and Dealership division which has the most significant minorities.

Core earnings per share (Core EPS) was down 14%.

The table below summarises the reconciliation from Earnings to Headline and Core Earnings:

R million HY1
    % change  
Net profit attributable to Imperial shareholders (earnings) 1 734   1 426     (18)  
Profit on disposal of assets (73)   (15)        
Impairments of goodwill and other assets   33        
Loss on sale of businesses (87)   10        
Remeasurement included in associates and JVs 9   18        
Tax effects of remeasurements 21   (1)        
Other 1   (5)        
Headline earnings 1 605   1 466     (9)  
Amortisation of intangibles 147   205        
Foreign exchange gain on intergroup monetary items   (104)        
Business acquisition costs 8   12        
Future obligations under an onerous contract 29          
Charge for amending conversion profile of deferred ordinary shares 70          
Remeasurement of contingent considerations and put option liabilities   17        
Other adjustments 2   (16)        
Tax effects (51)   (28)        
Core earnings 1 810   1 552     (14)  

Earnings in the comparable period were impacted positively by a profit from the disposal of property, plant and equipment (R73 million) and a profit on disposal of the tourism businesses (R87 million). This largely explains the difference between the 18% decline in earnings and the 9% decline in headline earnings.

The major difference between the 9% decline of headline earnings and the 14% decline of core earnings is the foreign exchange gain of R104 million on intergroup monetary items. With the creation of the Domestic Treasury Management Company (“DTMC”), and to better

match the currency exposure of our investments to our funding, we transferred some of our recent acquisitions in Africa together with their related debt in Europe (euro denominated) into the DTMC structure (dollar denominated). The devaluation of the euro against the dollar resulted in a once off foreign exchange profit. This was hedged on transfer and no further gain or loss will be incurred on these transactions.


Total assets increased by 9% to R64 billion (June 2014: R59 billion) mainly due to acquisitions and higher levels of working capital.

Property plant and equipment increased by R277 million to R10,7 billion, due to a further R308 million investment in our property portfolio, which occurred largely in the Logistics Africa and Logistics International divisions and in the South African vehicle businesses.

Goodwill and intangible assets rose to R7,4 billion from R6.8 billion as a result of the Imres, S&B Commercials and Pharmed acquisitions.

The transport fleet increased due to the R419 million expansion of the shipping fleet in the Logistics International division of which R310 million related to our expansion in South America.

Motor vehicles for hire is up R490 million compared to June 2014 due to seasonal requirements and increased by R123 million compared to December 2013 mainly due to the increased fleet of forklifts and industrial equipment in the Vehicle Import, Distribution and Dealerships division.

Investments and loans relate largely to the Regent investment portfolios where exposures to foreign equities and longer term investments were increased compared to June 2014 but lower than 31 December 2013.

Net working capital increased by 27% on June 2014 and 34% on December 2013 due to acquisitions, increases in inventory in the vehicle businesses and increases in accounts receivable in Logistics Africa, offset by increases in accounts payable. As a result, our average net working capital turn reduced to 11,3 times from 14,3 times in the comparable period.

Net debt (excluding preference shares) to equity at 83%, compared to 62% at the end of December 2013 and 63% at the end of June 2014. In addition to higher debt levels, this ratio was negatively impacted by equity declining R1.4 billion due to a put option liability relating to the minority shareholdings in Eco Health and Imres.

Net debt (excluding preference shares) was 32% higher than June 2014 due to the increase in working capital, acquisitions and expansion of the existing businesses during the period. While the net debt level is higher than the target gearing range of 60% to 80%; the net debt to EBITDA ratio at 2 times (2014: 1,4 times) still leaves room for further expansion of the Group.

The Group’s liquidity position is strong with R6,3 billion in unutilised facilities (excluding asset based finance facilities). Fixed rate debt represents 45% of the total debt and 72% is of a long term nature. The Group’s credit rating as determined by Moody’s was unchanged at Baa3 with a stable outlook.

During the current period, shareholders’ equity was impacted negatively by a put option liability of R391 million relating to the minority shareholdings in Imres; the strengthening of the Rand against the Euro, which resulted in a loss on the foreign currency translation reserve of R227 million; and a R140 million reduction in comprehensive income due to the re-measurement of defined benefit plans at the Logistics International division.

New business written on service, maintenance and warranty contracts generated by the Financial Services segment resulted in insurance, investment, maintenance and warranty contracts growing to R4,5 billion, up 4% from June 2014 and 9% from December 2013.


Cash generated by operations before capital expenditure on rental assets was 37% higher than the comparable period, at R2,9 billion. This was due mainly to a lower absorption of cash by working capital compared to the comparable period. The main drivers of this were reduced accounts payable outflows. After interest, tax payments and capital expenditure on rental assets, net cash flow from operating activities increased to R1,0 billion, up R426 million on the comparable period.

Capex on rental assets increased 46% mainly due to the car rental business. Earlier de-fleeting in the second half of the 2014 financial year led to lower proceeds on sale of vehicles in the current six month period.

The main contributors to the net R905 million invested in new business acquisitions during the period were Imres, Pharmed and S&B Commercials.

Net replacement and expansion capital expenditure excluding rental assets, was 15% lower than the comparable period, which included substantial investment by the Logistics International division in South America and higher investments by the South African businesses in properties.

Outflows from equities, investments and loans resulted mainly from our Insurance business investing in foreign equities and longer term investments.

Dividends amounting to R917 million were paid during the period.


An interim dividend of 350 cents per ordinary share (2014: 400 cents per share) has been declared.


During the period under review the resignations of Messrs Brody, Riemann and Hiemstra were announced.

On 23rd February 2015 Mr Schalk Engelbrecht resigned from the Board after serving as an independent non-executive director and a member of the Risk Committee since June 2008. The Board thanks him for his valued contribution to Imperial and wishes him well for the future.

The Board is pleased to announce the appointment, effective 24th February 2015, of Messrs Peter Cooper and Graham Dempster, both of whom have enjoyed highly distinguished executive careers, most recently with RMB Holdings and Nedbank respectively. Shareholders’ attention is drawn to the SENS announcements of the 24th February 2015 providing additional information on these gentlemen.

After 13 years as an independent non-executive director and chairperson of the Audit Committee in which capacities his contribution to the progress of Imperial has been invaluable, Mr Mike Leeming has expressed his intention to retire from the Board on 30th August 2015. He will be succeeded, effective 1st September 2015 by Mr Moses Kgosana, a highly regarded member of the accounting profession, who established and later merged his own firm with KPMG where in recent years he served as Chief Executive and Senior Partner.


The factors contributing to heightened uncertainty and volatility in economies, markets and industries globally are well publicised, as are the additional consequences of unemployment, low growth and confidence, increasing socio-political tensions, and electricity supply failures facing South African business. None of these are expected to change markedly in the short to medium term.

The factors most relevant to the fortunes of Imperial are: the weakening of the Rand against the currencies in which we import new vehicles; the poor state of the South African economy; a much slower than expected recovery of the German economy; and the impact of political uncertainty and a sustained low oil price on the economy and currency of Nigeria.

As described in the divisional reviews, the outlook for three divisions is unchanged (i.e. Logistics Africa; Vehicle Retail, Rental and Aftermarket Parts; and Financial Services). A slower recovery in Germany has caused us to reduce our full year expectations of the Logistics International division. Most significantly, the unit volume decline in the Vehicle Import, Distribution and Dealership division has necessitated a further reduction of expected profits.

We therefore expect Imperial’s second half operating performance to be positive, but with earnings for the year to June 2015 to be below 2014.


In addition to the initiatives described in the Overview, the Group has embarked on various strategies to enhance the value added by Imperial Holdings and the ompetitiveness and sustainability of its subsidiaries. We are confident that these initiatives will improve risk adjusted returns and unlock shareholder value in the medium term.

MARK J. LAMBERTI – Chief Executive Officer
OSMAN S. ARBEE – Chief Financial Officer

The forecast financial information herein has not been reviewed or reported on by Imperial’s auditors.