Prospects

Imperial’s balance sheet remains strong despite significant organic and acquisitive growth, and share buy-backs in the recent past. As a result, the group is well positioned to take advantage of organic growth and acquisition opportunities as they arise.

In South Africa, we expect trading conditions in the logistics industry to remain challenging, driven by a sluggish economy. The division recently underwent a strategic consolidation process, which positions it well to be more competitive and cost-effective in a tough market. Further benefits from this process will be realised in the second half of the 2014 financial year. The fundamentals of the logistics industry are good and given Imperial’s infrastructure, network and expertise, it is ideally positioned to capitalise on these growth opportunities and gain more business in South Africa.

Prospects in the rest of Africa are good, and our expansion into the continent will continue to gain momentum, especially in consumer markets. Our integrated capabilities in logistics, distributorships and marketing, provide the ideal platform to take advantage of growth opportunities in these markets.

In Imperial Logistics International, activity levels have normalised from the slowdown in December and the business remains well positioned in attractive niches in the German logistics industry. We have cautiously entered the South American inland shipping market, which offers the group excellent growth prospects and where our expertise as the leading inland shipping company in Europe will stand us in good stead.

We will continue to follow our customers who are entering new markets and acquisitions will also be a growth driver.

We anticipate trading conditions in the new motor vehicle market to be tougher. Reduced disposable income, interest rate increases, a significantly weaker currency and the high base created by strong volume growth over the past four years all present headwinds affecting margins and growth. While our inventory position has improved, we expect the market to be more competitive as market conditions become more challenging. As a result of new vehicle price increases, the used car market should improve further and after-sales parts and service revenues will continue benefiting from the increase in the installed base of vehicles, especially in the brands we represent exclusively. We also expect to benefit from our strong position in the commercial vehicle market.

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.

Regent will focus on improving its underwriting result, which will be supported by the business’ recent exit from underperforming businesses. Our investment portfolio will continue to be prudently managed and while we cannot predict the performance of investment markets and our investment returns, we expect that our underwriting performance will improve for the 2014 financial year.

The 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.

Overall, given current market conditions, it will be difficult to achieve growth in the 2014 financial year as we expect our vehicle distribution activities to be under continued pressure in the second half of the financial year, while the remainder of our Automotive value chain together with Financial Services is expected to be robust and our Logistics pillar is expected to perform well.

 

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