Imperial to grow its logistics business through acquisitions
Firm looking mostly outside SA
IMPERIAL Holdings, the listed transport and mobility group, plans to significantly increase the size of its logistics business through acquisitions, with the majority of these acquisitions being offshore.
Mark Lamberti, the chief executive, said recently that between 80 percent and 90 percent of the acquisitions made by the group going forward would be outside South Africa and in the logistics business.
Lamberti expressed the hope that in three to five years the logistics business would be significantly bigger than the vehicles business.
Imperial’s total logistics business achieved revenue of R47.9 billion and operating profit of R2.5bn in the year to June compared with the R71.2bn of revenue and R3.5bn in operating profit generated by the vehicle business.
Foreign operations constituted 42 percent of the group’s record revenue of R118.85bn and 36 percent of its record operating profit of R6.4bn.
Lamberti stressed the reason they were so intent on expanding Imperial’s international presence was simply because the group had such a large market share in South Africa it would be difficult to grow further.
South Africa constituted 58 percent of the group’s revenue and 64 percent of the group’s operating profit in the year to June.
Lamberti added it was imperative throughout Imperial to grow revenues and profits that were less susceptible to currency volatility to reduce the group’s exposure to exchange rate sensitive operating profits attributable mainly to directly imported vehicles.
He said Imperial was always looking at potential acquisitions but nothing was imminent in Europe.
However, the group could make acquisitions in its African business this financial year in pharmaceutical or fast moving consumer goods distribution either in the Southern African Development Community or east or west Africa. Strategic disposals during the year generated proceeds of about R5.2bn.
Lamberti said excluding insurance business Regent, Imperial had disposed of 29 businesses that utilised R2.8bn of invested capital and generated sales of R6bn, but only R45 million in operating profit, which was indicative of the need “for some tidying up”.
Low return
He stressed that the group had to get rid of businesses where it employed a lot of effort but received a low return.
“This is a large group and we have got some very competent managers, but we can’t have them wasting time with a business that only makes R10m, R15m or R20m a year when that time could be applied to a business that makes 10 times as much.”
Previously announced disposals by Imperial included its 100 percent interest in Regent to Hollard Insurance Group and Yellowoods Group for R2.2bn, its 65 percent interest in Neska to the Port Authority in Cologne in Germany for R1.3bn and its 67.5 percent share of the Goscor group to management for R1.03bn.
Lamberti said 32 various smaller disposals in the international, vehicle import and vehicle retail businesses were planned, while the group anticipated receiving R2.6bn over the next 12 to 18 months from the sale or sale of non-strategic properties.
“The properties we are selling are either pieces of vacant land or properties where the market has moved or properties where we don’t need to own them and can be a tenant,” he said.
“In terms of our total property portfolio, we would still have an R8bn portfolio but will get rid of the non-strategic properties.”
Imperial last week reported a 3 percent decline in headline earnings a share to 1 579c in the year to June from 1 624c in the previous year. Shares in Imperial rose 1.08 percent on Friday to close at R165.