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1. 2 AGENDA Overview Group Results Divisional Results Strategy Conclusion.

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Presentation on theme: "1. 2 AGENDA Overview Group Results Divisional Results Strategy Conclusion."— Presentation transcript:

1 1

2 2 AGENDA Overview Group Results Divisional Results Strategy Conclusion

3 3 Market leading positions Strong platforms for future growth Positioned in industries experiencing structural but cyclical growth Significant annuity income streams Entrepreneurial culture to drive next growth phase IMPERIAL TODAY StrengthsCurrent Issues Generally challenging trading conditions Significant motor market slowdown expected to continue for longer Eliminating non-core and large problem businesses Weak return on capital in some areas

4 4 SALIENT FEATURES 7.4%7.3%Operating margin R2.2 bnR2.3 bnOperating profit 10.2%10.5%EBITDA margin R3.1 bnR3.3 bnEBITDA (R500 m)Profit attributable to shareholders (R1.6 bn)Discontinued operations H1 FY 2008 R1.25 bn R31.7 bn 550.6 cents H1 FY 2008 H1 FY 2007 (15.0%) 3.7% (19.4%) % Change Net profit Revenue Headline earnings per share Continuing operations

5 5 DISCONTINUED OPERATIONS - AVIATION Process followed Three transaction advisors – US, Europe and SA Information Memorandum to 35 interested parties 7 shortlisted bidders ACL sold separately Transaction progress ACL sale complete and settled at 22.5 m, 18.7m loans repayable in May 08 Naturelink concluded, CPs pending Safair and SLF non-binding MOU signed in December Final contract negotiations underway Rm 848 Total impairment 184 Liability Indemnity 50 Loan Impairment 105 112 165 295 Air Contractors – goodwill SLF (mostly deferred tax and aircraft) Parts Aircraft

6 6 DISCONTINUED OPERATIONS - CVH (Tyco) Management actions Termination of distribution agreements and continuation of dealer network – OEMs assuming distribution and assembly Aggressive reduction of inventories through the appointment of a dedicated liquidation team Careful planning of dealer network Assistance to OEMs for smooth handover to optimise customer service Reasons for losses Large orders to compensate for long lead times Over-generous buy-back and maintenance obligations given to effect sales Product deficiencies Rationale for closure Long order lead times and working capital cycle excessive stock holding forex risk Vehicle margins too low to compensate for the above Low market shares in DAF and Renault 690Total closure costs 50Debtors 90Closure costs 42Spare parts 200 128 180 Vehicle stock Maintenance obligations Buy-back agreements Rm

7 7 Group Results

8 8 INCOME STATEMENT EXTRACTS (34.1%)12783Associates 10(83)Lereko fair value adjustment 48.9%(358)(533) Interest, fair value adjustments and forex movements Profit from continuing operations1 2501 470(15.0%) 3.7%30 52631 670Revenue H1 FY 2007H1 FY 2008R million% change 2 2492 300Operating profit2.3% 7.37%7.26%Operating margin 106 (1 583) Discontinued operations – trading income and fair value loss 1 429(500)Own shareholders attributable income13.6%(147)(167)MinoritiesTaxation517616(16.1%)

9 9 (34.1%)12783Associates 10(83)Lereko fair value adjustment 48.9%(358)(533) Interest, fair value adjustments and forex movements Taxation517616(16.1%) 3.7%30 52631 670Revenue H1 FY 2007H1 FY 2008R million% change 2 2492 300Operating profit2.3% 7.37%7.26%Operating margin INCOME STATEMENT EXTRACTS Profit from continuing operations1 2501 470(15.0%) 106 (1 583) Discontinued operations – trading income and fair value loss 1 429(500)Own shareholders attributable income13.6%(147)(167)Minorities Margins held up despite market downturn

10 10 Profit from continuing operations535.51 470(15.0%) 106 Discontinued operations – trading income and fair value loss 1 429(500)Own shareholders attributable income13.6%(147)(167)Minorities INCOME STATEMENT EXTRACTS (34.1%)12783Associates 10(83)Lereko fair value adjustment 48.9%(358)(533) Interest, fair value adjustments and forex movements Taxation517616(16.1%) 3.7%30 52631 670Revenue H1 FY 2007H1 FY 2008R million% change 2 2492 300Operating profit2.3% 7.37%7.26%Operating margin 1 250 (1 583) Up due to interest rate rise and higher debt

11 11 Profit from continuing operations1 2501 470(15.0%) 106 (1 583) Discontinued operations – trading income and fair value loss 1 429(500)Own shareholders attributable income13.6%(147)(167)Minorities(34.1%)12783Associates 10(83)Lereko fair value adjustment 48.9%(358)(533) Interest, fair value adjustments and forex movements Taxation517616(16.1%) 3.7%30 52631 670Revenue H1 FY 2007H1 FY 2008R million% change 2 2492 300Operating profit2.3% 7.37%7.26%Operating margin INCOME STATEMENT EXTRACTS Due to Imperial share price movement

12 12 INCOME STATEMENT EXTRACTS (34.1%)12783Associates 10(83)Lereko fair value adjustment 48.9%(358)(533) Interest, fair value adjustments and forex movements Taxation517616(16.1%) 3.7%30 52631 670Revenue H1 FY 2007H1 FY 2008R million% change 2 2492 300Operating profit2.3% 7.37%7.26%Operating margin Profit from continuing operations1 2501 470(15.0%) 106 (1 583) Discontinued operations – trading income and fair value loss 1 429(500)Own shareholders attributable income13.6%(147)(167)Minorities

13 13 BALANCE SHEET EXTRACTS

14 14 BALANCE SHEET EXTRACTS Investment in dealership properties

15 15 H1 FY 2007 H1 FY 2008 BALANCE SHEET EXTRACTS Reduced by reclassification to assets held for sale

16 16 BALANCE SHEET EXTRACTS Aviation, CVH and Tourvest to be converted to cash

17 17 BALANCE SHEET EXTRACTS

18 18 CASH FLOW (1 832)(1 809)Expansion capex and acquisitions (2 874)(3 041)Cash flow from investing activities (1 429)(3 976) New funding raised (net of cash) (542)(683)Payments to shareholders(397)(280)Investments & loans (645)(952)Replacement capex 1 987(252)Cash flow from operating activities (1 225)(1 212)Interest and tax (230)(2 459)Net working capital movements 3 4423 419Cash generated by operations H1 FY 2007H1 FY 2008 Six months to December

19 19 CASH FLOW (1 832)(1 809)Expansion capex and acquisitions (2 874)(3 041)Cash flow from investing activities (1 429)(3 976) New funding raised (net of cash) (542)(683)Payments to shareholders (397)(280)Investments & loans (645)(952)Replacement capex 1 987(252)Cash flow from operating activities (1 225)(1 212)Interest and tax (230)(2 459)Net working capital movements 3 4423 419Cash generated by operations H1 FY 2007H1 FY 2008 Six months to December Terex/New Holland Dealership inventories Logistics debtors

20 20 CASH FLOW (1 832)(1 809)Expansion capex and acquisitions (2 874)(3 041)Cash flow from investing activities (1 429)(3 976) New funding raised (net of cash) (542)(683)Payments to shareholders(397)(280)Investments & loans (645)(952)Replacement capex 1 987(252)Cash flow from operating activities (1 225)(1 212)Interest and tax (230)(2 459)Net working capital movements 3 4423 419Cash generated by operations H1 FY 2007H1 FY 2008 Six months to December Includes R1.4 bn of revenue producing assets

21 21 CASH FLOW (1 832)(1 809)Expansion capex and acquisitions (2 874)(3 041)Cash flow from investing activities (1 429)(3 976) New funding raised (net of cash) (542)(683)Payments to shareholders(397)(280)Investments & loans (645)(952)Replacement capex 1 987(252)Cash flow from operating activities (1 225)(1 212)Interest and tax (230)(2 459)Net working capital movements 3 4423 419Cash generated by operations H1 FY 2007H1 FY 2008 Six months to December No interim dividend recommended Intention to resume dividend policy at year end R1.2 bn IPL2 Bond settled mainly from internal sources, balance from bank facilities Extensive liquidity facilities available

22 22 CASH FLOW (1 832)(1 809)Expansion capex and acquisitions (2 874)(3 041)Cash flow from investing activities (1 429)(3 976) New funding raised (net of cash) (542)(683)Payments to shareholders(397)(280)Investments & loans (645)(952)Replacement capex 1 987(252)Cash flow from operating activities (1 225)(1 212)Interest and tax (230)(2 459)Net working capital movements 3 4423 419Cash generated by operations H1 FY 2007H1 FY 2008 Six months to December

23 23 Divisional Results

24 24 DIVISIONS Dealerships 30.4% Distributors 25.4% Logistics - South and Southern Africa 14.1% Logistics - Europe 11.9% Leasing and Capital Equipment 10.1% Car Rental 4.2% Insurance 4.0% -16.7 -10.8 -3.0 21.0 12.0 24.2 55.2 Car Rental Logistics - Europe Distributors Leasing and Capital Equipment Logistics – South and Southern Africa Dealerships Insurance Revenue Growth by Division (%)Revenue by Division Dealerships 9.9% Distributors 19.9% Logistics - South and Southern Africa 16.4% Logistics - Europe 8.3% Leasing and Capital Equipment 28.2% Car Rental 8.3% Insurance 9.0% Logistics - Europe -46.0 -27.5 -16.8 83.0 14.0 12.0 53.0 Distributors Car Rental Leasing and Capital Equipment Logistics – South and Southern Africa Dealerships Insurance Operating Profit Growth by Division (%)Operating Profit by Division

25 25 LOGISTICS – South and Southern Africa Operating profit Operating margin% of group %Rm Revenue Increased margin despite 31% higher fuel price which increased revenue by R91 million without an increase in operating profit FMCG (primarily non-durables) distribution business contributes 38% to revenue –Steady performance for the half year –Possible moderation from second half, overall growth still positive Urgent attention was given to isolated problem areas and working capital position Steady increase in penetration into higher value added services Large blue chip customer base 368 7.9% 1416.0 8.0% 4618 2007 1214.6 2008

26 26 IMPERIAL LOGISTICS INDUSTRY PRESENCE

27 27 LOGISTICS – Europe Good performance of German economy, particularly steel and auto Excellent half year – extra month contributed R15 m to attributable profit All divisions - inland waterways, bulk and container terminals and Panopa Logistics – performed well Three new acquisitions: Laabs and Food Tankers (liquid bulk transport in Europe) and Rijnaarde, inland waterway chartering in the Netherlands started positively Exciting new developments planned –25,000 m² spare parts centre in Herten –expansion of the terminal facilities in Cologne –doubling of container space in Düsseldorf and Duisburg –two new container terminals in the Lower Rhine region –expansion of inland waterway fleet Operating profit Operating margin% of group %Rm Revenue 187 3.2% 838.1 4.8% 3898 2007 2112.3 2008

28 28 LEASING AND CAPITAL EQUIPMENT Capital equipment business the main contributor All major contracts performing well Attractive new large contracts won Strong demand and high utilization in plant hire Terex and New Holland distributorships gained momentum The passenger and commercial vehicles in rest of Africa performed well, although partially from de-fleeting New opportunities being pursued in Botswana, Nigeria, Rwanda and Swaziland Good growth from SA leasing - units growing by 13% y-o-y 27.653.0635Operating profit Operating margin 19.4 2007 19.2 2008 % of group %Rm 331410.555.2Revenue

29 29 CAR RENTAL 8.112.0186Operating profit Operating margin 15.1 2007 13.7 2008 % of group %Rm 13624.324.2Revenue Operating margins in car rental business maintained Rental days 11% up, pre-tax profit 5% up due to higher interest cost Divisions results exclude Tourvest Major brand repositioning after long term renewal of Europcar franchise Exclusive in and outbound referral agreements with National and Alamo New business from government, construction and energy, and low cost airlines Good revenue growth but lower margins in Auto Pedigree Springbok Atlas sales 16% up, working closely with 2010 LOC New markets developed in China, Taiwan, Portugal, Spain and Middle East

30 30 DISTRIBUTORS 19.5(27.5)448Operating profit Operating margin 6.6 2007 5.4 2008 % of group %Rm 831826.3(10.8)Revenue (AMH, UK and SA parts businesses, NAC and Australian dealerships) Difficult trading in AMH due to interest rates and NCA Appropriate measures were taken to streamline the business to ensure future acceptable returns whilst exploring opportunities for growth NAC performed well as previous problem areas in the contracts and maintenance divisions have been rectified - good aircraft sales and order book Reconsidering the future of UK parts activities

31 31 DEALERSHIPS 9.7(16.8)223Operating profit Operating margin 2.6 2007 2.2 2008 % of group %Rm 995831.4(3.0)Revenue Pressure on the affordability of new and used vehicles Weak market to be seen against three prior years of extraordinary growth in vehicle sales Investment in new facilities continued as we are confident that the market will turn and parts and service operations will continue to grow Margins on used vehicles now starting to improve Well represented in commercial vehicles where demand remains high Satisfactory performance from UK DAF dealerships

32 32 Decline in premium income NCA (monthly instead of annual or term policies) downturn in the motor market Regent Insurance premiums steady but Regent Life 47% down Number of policies written now almost back to pre NCA level, however lapses rose Underwriting results remained strong - combined underwriting result 62% higher at R139 million Investment income down on weak equity markets Year-on-year difference in investment income had a major impact on group profitability INSURANCE 8.8(46.1)202Operating profit % of group %Rm 13174.2(16.7)Revenue (Regent Insurance, Regent Life and Imperial Re)

33 33 PRIMARY ASSOCIATES 3825Discontinued operations (1)(87)Renault H1 FY 2007H1 FY 2008 43 127 24Other 104Imperial Bank

34 34 Strategy

35 35 Rationalise portfolio to create a more coherent group of businesses Bolster groups financial strength through disposals and unbundling Focus on capital discipline and returns balance growth and return targets drive returns through focusing on increased utilization of existing assets/investments focus on capital allocation and return optimization at business unit level Pursue asset-light opportunities that are adjacent to current businesses OVER-RIDING STRATEGIC IMPERATIVES

36 36 Rationale for completed and soon to be realised divestments –Underperformance CVH Aviation –Capital intensive businesses Leasing and capital equipment Aviation –Strategic fit Tourvest Low growth / weak profitability Consumed disproportionate amount of capital Subscale and complex with limited synergies STRATEGIC STEPS

37 37 STRATEGY: WHATS THE MARKET OPPORTUNITY? Corporate/ Industrial * Based on December 2007 interim results excluding head office and eliminations CAPITAL OPERATING PROFIT LOGISTICS Customer Requirement Materials and products – management, planning, storage and delivery Imperials Solution End-to-end across the logistics chain Key Drivers Market increase in industrial and construction activity Step-change in scale of consumer/retail market Secular shift towards outsourcing and supply chain management CAPITAL OPERATING PROFIT CAR RENTAL AND TOURISM Customer Mobility Requirement People – facilitate vehicle useage and transport of tourists Imperials Mobility Solution Large, branded and accessible vehicle rental and coach network Key Drivers Relatively underdeveloped public transport infrastructure Continued growth in international inbounds (incl WC 2010) Rapid emergence of domestic business travel/leisure market R5 886 34% R575m 34% MOTOR AND FINANCIAL SERVICES Customer Requirement People – facilitate vehicle ownership and financial security Imperials Solution Broad range of vehicles integrated with value for money financial products Key Drivers Relatively underdeveloped public transport infrastructure Higher levels of economic participation/activity and credit extension Growing ownership bias given status and safety implications Further benefits from integrated retail and financial services CAPITAL OPERATING PROFIT* R9 598m 55% R873m 54% R1 965m 11% R186m 12% Consumer

38 38 Inbound transportation WarehousingDistribution TRADITIONAL SERVICE OFFERING Inbound transportation Freight forwarding & clearing Procurement Production planning Packaging & Merchandising Inventory management WarehousingDistribution System integration ENVISAGED SERVICE OFFERING Potential areas of asset-light opportunity LOGISTICS STRATEGY

39 39 Focus on familiar businesses (motor and European logistics) with adequate returns instead of turnaround opportunities Imperial Logistics International has –highly sought-after bulk and container terminals –important inter-modal transport solutions –an inland waterway transport business of considerable scale, and –a highly sophisticated 4PL business Steadily building on UK dealership base Returning Australian dealership group to profitability INTERNATIONAL STRATEGY

40 40 LEASING AND FLEET MANAGEMENT (EQSTRA) - UNBUNDLING Refine business focus of Imperial and reduce exposure to capital intensive businesses Create a new listed entity with a sharp focus on capital intensive leasing and infrastructure related activities Capitalise on fixed investment spending and the demand for commodities Attract higher leverage than Imperial as a whole Unlock balance sheet capacity and growth potential for Imperial and Eqstra

41 41 EQSTRA UNBUNDLING Status Timing Funding of Eqstra Expected gearing levels Future of Imperial Capital Treasury functions Board

42 42 ILLUSTRATIVE PRO FORMA BALANCE SHEET AFTER UNBUNDLING 4.1(1.3) - 3.7(0.3) 1.50.1 0.3(5.4) 3.1- 5.4(0.3) 2.4- 1.0- 2007 after the unbundling pro forma 2007 Unbundling Adjustments 2.0(0.5) 1.6- 0.4- 10.0(4.7) 10.3(2.0) 24.3(7.2) 24.3(7. 2) Net working capital Net assets held for sale Investments, loans and other non current assets Vehicles for hire Leasing assets Transport fleet Property, plant & equipment Investments in associates and joint ventures Intangibles Rbn Financial and other liabilities Insurance funds Perpetual preference shares Net interest-bearing debt (net of cash) Shareholders funds 5.4 2.8 4.0 1.4 5.7 3.1 5.7 2.4 1.0 2007 before Unbundling 2.5 1.6 0.4 14.7 12.3 31.5 2.8

43 43 Pro forma debt position after restructuring Debt/equity Reduction due to unbundling Estimated proceeds from disposals Net debt EquityDebt R bn ILLUSTRATIVE DEBT (PRO FORMA) 120% 0.6 61% (2.0) 14.7 * Majority to be received within 24 months. Balance over 5 years 6.6 (4.7) 12.3 10.9 (3.4)*

44 44 Conclusion

45 45 STRATEGY SUMMARY Strategy focus on balancing growth and return/efficiency targets increase returns through asset-light activities in adjacent business sectors Underlying drivers of current initiatives: fix, sell or close underperforming businesses achieve healthy, sustainable returns focus on simple, logical business groupings

46 46 Difficult trading conditions will continue in the short to medium term Logistics and Eqstra to continue performing well with some moderation Car rental will carry once-off costs of rebranding Balance sheet capacity freed up Opportunities for growth will be pursued selectively Imperial exposed to strongly growing sectors OUTLOOK

47 47 QUESTIONS

48 48

49 49 Appendix

50 50 SCALE OF OPERATIONS - Earth moving equipment - New - Used Vehicles sold - Trucks - Forklifts - Passenger and light commercials Owned fleets % Change (0.2) 4.5 (0.2) (18.3) 11.2 26.4 H1 FY 2008 41 447 10 910 34 507 50 141 6 196 1 555 41 521 10 441 34 592 61 404 5 573 1 230 H1 FY 2007 Invested in future expansion (6.3)R2.09 bnR2.23 bn


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