Imperial’s unbundling will depend on results

Imperial Holdings posted “solid” results for the six months ended December 2017, as talk of unbundling its Motus integrated motor vehicle group from its logistics arm came into focus.

The group said the “key strategic question” was whether the long-term fortunes of its Imperial Logistics and Motus divisions would be boosted by separate listings. A decision would be made by June 2018. The share dropped 9.87% at the close of trade on Tuesday to about R247.

“We are not trying to get out of SA in any way,” Imperial CEO Mark Lamberti said on Tuesday. He said the group would base any unbundling on its annual results to June 2018.

Splitting Imperial Holdings, which employed about 49,000 people in 33 African and European countries, into logistics and vehicle sectors would be carried out on the JSE. But for Motus to grow, it would have to happen outside of South African markets, he said.

Activities in Africa produced 63% and 80% respectively of group revenue and operating profit during the six months. The rest was generated in Europe and the UK.

Imperial Logistics generated nearly 41% and 45% of group revenue and operating profit respectively and made 62% of foreign operating profit.

Motus operates across import, distribution, retail, rental, aftermarket parts and vehiclerelated financial services, generating about 59% and 55% of group revenue and operating profit respectively, while adding 13% of foreign operating profit.

Lamberti said the gearing of two new listed entities would be between 40% and 50% for each, from 71% overall for Imperial now. The latter number comes after the R2bn sale of Imperial’s German agrochemical unit Schirm in January 2018 to JSElisted chemicals group AECI.

“Imperial’s results were in line with our expectations, with a resilient performance in logistics offset by a slightly weaker performance by Motus,” said Abdul Davids, portfolio manager at Kagiso Asset Management.

He said the divisions were expected to grow revenues and operating profit in the financial year to June 2018.

Excluding recent acquisitions and disposals, total revenue for the group rose 5% to a record R66.5bn as operating profit also grew 5% to R3.1bn.

Operating margins declined from 4.9% to 4.6%, mainly as a result of a reduction in luxury vehicle brands in favour of entry-level, lower-margin vehicles and the acquisition by Motus of lower-margin UK and Australian businesses.

Net working capital of R8.9bn was in line with June 2017. Disposals of nonstrategic businesses and properties during the six-month period generated proceeds of R693m, excluding the sale of Schirm.

“It is a solid result rather than overly exciting,” said Avior Capital Markets analyst Mark Hodgson. “A key issue is whether short- and long-term value is unlocked from an unbundling.”

49,000 people are employed by Imperial Holdings 33 countries in Africa and Europe play host to the group’s Imperial Logistics and Motus businesses