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Tough trading conditions weighing on Imperial’s revenue growth in SA

Tough trading conditions weighing on Imperial’s revenue growth in SA

JOHANNESBURG – Challenging trading conditions in South Africa were placing a handbrake on the revenue growth of listed Imperial Holdings’ logistics and motor businesses in the country.
However, the listed transport and mobility group said yesterday it anticipated solid operating and financial results in the year to June.

Imperial said it expected to produce double-digit growth in headline earnings a share off the low base of last year and group revenue to increase in line with the first half and operating profit at a higher rate than the first half.

In February, Imperial reported an 11percent growth in group revenue to a record R66.5billion for the six months to the end of December, while operating profit increased 5percent to R3.1bn.

Imperial said about 54percent of group revenues in the current financial year would be produced in South Africa.

While it was still early days, the new political leadership had given rise to a general improvement in business and investor confidence in South Africa, it said.

But Imperial said despite the World Bank and S&P revising upwards, South Africa’s gross domestic product forecasts for this year and next year, high unemployment and sub-optimal economic growth continued to weigh on trading conditions, which remained challenging.

The group said the impact of this environment on the revenue of Imperial Logistics, of which about 31percent would be produced in South Africa, was depressed volumes and competitive pressure resulting in the renewal of contracts at lower margins. Motus, its motor business, would generate about 69percent of its revenue from South Africa.

Mixed blessings

Imperial said the luxury vehicle brand segment remained under severe pressure but sales volumes for its imported brands, comprising Hyundai, Kia and Renault, increased 10percent in the 10 months to April this year.

The group said its vehicle mix was aligned to current market demand, specifically entry-level and small sport utility vehicle models, and the market share of its imported brands increased 1percent to 14.9percent.

Imperial said its business in the rest of Africa, which constituted 8percent of group revenues and 21percent of the revenues of Imperial Logistics, benefited from improved economic prospects in most sub-Saharan Africa countries.

The group said R1.5bn had been received in the 10 months to end-April from the disposal of properties and its net debt to equity ratio had dropped to 71percent from 80percent in December last year and 98percent in December 2016.