Imperial of South Africa Seeks Deals Outside Home MarketLiezel Hill
Imperial Holdings Ltd., owner of South Africa’s biggest car dealership network, is looking for acquisitions to expand its logistics business on the continent to counter slower growth in its home market.
Imperial plans to sell some assets “while acquiring mainly foreign businesses to offset the limited growth opportunities” in South Africa, the Johannesburg-based company said in its full-year earnings statement on Tuesday. The company’s business in its domestic market, which accounts for almost two-thirds of sales, battled softer demand in the year through June as power shortages and a weaker currency resulted in “skittish” consumption patterns, the company said.
“We continue to believe the rest of Africa is going to grow faster than South Africa,” Chief Executive Officer Mark Lamberti said in a presentation. The company’s logistics business, which contributed 39 percent of total revenue, “is Imperial’s major growth vector,” Lamberti said. The unit already gets most of its revenue from outside of South Africa.
Despite deteriorating conditions, operating profit gained 1 percent in the 12 months through June to 6.2 billion rand ($469 million), beating the average analyst estimate of 5.7 billion rand. Three acquisitions, in South Africa, the Netherlands and the U.K., helped boost revenue 7 percent to a record 110.5 billion rand. Earnings per share declined 6 percent after the profitability of the company’s vehicle import business fell due to a weaker rand against the dollar.
Unless there is a marked deterioration in current conditions, Imperial expects single-digit growth in revenue and operating profit from continuing operations in its 2016 fiscal year, the company said.
Imperial’s shares gained 9.8 percent, the most since March 2009, to 172.46 rand as of 11 a.m. in Johannesburg. The stock is down 6.7 percent this year, valuing the company at 35 billion rand.
Imperial’s net debt to equity ratio of 69 percent is well within its target range, “indicating capacity for further acquisitions and organic growth,” the company said.
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