Imperial Logistics — Imperial Holdings — H1 2013 Earnings Presentation
70 slides from Imperial Logistics's earnings presentation, February 2013
Slide 1: Interim results presentation
Interim results presentation For the six months ended 31 December 2012
Slide 2: Agenda
Agenda » Highlights » Divisional performance » Financial Review » Group prospects and strategy » Questions » Appendix 2
Slide 3: Highlights
Highlights Revenue 18% R45 262m Operating profit 12% R2 939m HEPS 14% 829 cps Core EPS * 15% 872 cps Interim dividend per share 27% 380 cps Good result overall - varied across the group *Core EPS mainly excludes l d : • amortisation of intangibles on acquisitions in the current period • business acq
Slide 4: Business conditions in key markets
Business conditions in key markets » Trading conditions challenging in SA and Europe » Industrial action in SA and Korea impacted the group » Slower growth in the SA motor vehicle market » Increasing demand for affordable vehicles » Volumes and pricing under pressure in SA Logistics • Especially in
Slide 5: Imperial's performance during the period
Imperial’s performance during the period » Good first half result » Good portfolio effect » Retail cluster of businesses performed well » Strong growth was achieved in annuity revenue streams generated from after-sales parts, service and financial services » Aftermarket parts, components and industr
Slide 6: Performance of the three business pillars
Performance of the three business pillars Distribution, Retail & Logistics Car Rental & Tourism Financial Services Revenue = R15,9 bn Revenue = R1,9 bn Revenue = R28,9 bn -1% 27% 14% Operating profit = R707m Operating profit = R183m Operating profit = R2,1 bn -1% -13% 19% The Three Pillars of Imperi
Slide 7: Group profit trend
Group profit trend Revenue (LHS) Operating Profit (RHS) 3.0 2.9 60 2.6 3 2.4 2.1 40 1.8 45.3 42.4 2 Rbn 1.3 1.4 38.4 31.4 33.3 20 25.7 27.8 1 23.6 0 0 June 09 Dec 09 June 10 Dec 10 June 11 Dec 11 Jun 12 Dec 12 Core EPS HEPS 867 839 872 900 829 725 756 727 653 645 581 600 503 533 cps 472 431 300 269
Slide 8: Southern Africa logistics
. D THINKING VY IMPERIAL F Y 2 —_~ Y [e)) ac} © 2 — — <x Cc — i) & ~ =) ie) Y)
Slide 9: Southern Africa logistics
Southern Africa logistics Revenue (Rm) Operating profit (Rm) Operating Margins +4% -22% 6.2% 4.9% 8,677 4.6% 8,311 513 400 H1 2013 H1 2012 H1 2013 H1 2012 H1 2013 H2 2012 H1 2012 Challenging trading conditions in SA, Rest of Africa strong » Strike had a material impact across all South African busin
Slide 10: Southern Africa logistics
Southern Africa logistics Revenue by activity Revenue by sector 49% 36% 38% 17% 8% 10% Steel and Metals 2% 15% 26% Consumer Goods & Retail Freight & Transport Industrial Products Warehousing & Distribution Construction Supply Chain Management Chemicals, Fuel & Gas Mining & Agriculture 10
Slide 11: Revenue split between SA and ROA
Revenue split between SA and ROA » Rest of Africa expansion gaining momentum » Revenue up 24%; Operating profit up 22% » RTT Health Sciences acquisition will contribute further – approximately R240m p.a of revenue generated in rest of Africa 4% 5% 5% 18% 23% 26% 96% 95% 95% 82% 77% 74% Rest of Afric
Slide 12: International logistics
N80 ene Ay International logistics IMPERIAL
Slide 13: International logistics (EURO)
International logistics (EURO) Revenue (€m) Operating profit (€m) Operating Margins +69% +45% 5.7% 5.0% 669 4.3% 29 397 20 H1 2013 H1 2012 H1 2013 H1 2012 H1 2013 H2 2012 H1 2012 Slowing German economy » Tougher trading conditions; contribution of Lehnkering assisted growth » Volumes depressed acros
Slide 14: International logistics (ZAR)
International logistics (ZAR) Revenue (Rm) Operating profit (Rm) Operating Margins +74% +52% 5.6% 7,211 4.9% 307 4.3% 4,159 202 H1 2013 H1 2012 H1 2013 H1 2012 H1 2013 H2 2012 H1 2012 Exchange rate benefit » 2012 Average R/€: 10.79 vs 2011 Average R/€: 10.47 14
Slide 15: International logistics
International logistics Revenue by sector 18% 29% 11% 2% 2% 4% 16% 5% 12% Chemicals Steel Automotive Energy Paper/Packaging Agricultural Imperial Shipping Group Food Other Lehnkering Services Panopa Neska Brouwer Shipping 15
Slide 16: German chemical production
German chemical production LEHNKERING Production Index (2005 = 100) Specialised chemical and liquid food warehousing, distribution and contract manufacturing business. Shipping and Steel have been incorporated into Imperial Shipping and Panopa 125 126 » Strong footprint in chemical industry 118 » Co
Slide 17: Car rental and tourism
= Y — =) Oo — ze) Cc © © ~ Cc oO — — © O ~ AL . THINKING IMPER
Slide 18: Car Rental and Tourism
Car Rental and Tourism Revenue (Rm) Operating profit (Rm) Operating Margins -0.8% -13 % 10.8% 9.5% 9.1% 1,924 1,939 210 183 H1 2013 H1 2012 H1 2013 H1 2012 H1 2013 H2 2012 H1 2012 Performance below expectation » Margin improvement vs H2 2012 due to turnaround at Auto Pedigree & Panelshops » Revenue
Slide 19: Distributorships
= v Distributorships IMPERIAL
Slide 20: Distributorships
Distributorships Revenue (Rm) Operating profit (Rm) Operating Margins +17% +13% 8.8% 8.6% 1 316 8.3% 15,843 1,162 13,590 H1 2013 H1 2012 H1 2013 H1 2012 H1 2013 H2 2012 H1 2012 Performed well » Excellent revenue growth mainly due to improved after sales » Impacted by supply disruptions due to strike
Slide 21: Drivers of SA vehicle market
= Y Drivers of SA vehicle market IMPERIAL
Slide 22: South African new vehicle sales
South African new vehicle sales » Fundamentals continue to be good • Good levels of credit availability • Low interest rates • Still below peak of 2006 • Underpenetrated market relative to developed world – in line with emerging market peers Passenger car sales Vehicle penetration in SA (units) (uni
Slide 23: Vehicle affordability good
Vehicle affordability good » Debt servicing costs have declined » Consumers are changing their cars much earlier » Will support demand Debt service cost as a percent of Replacement cycles getting shorter disposable income (loan duration) 14% 50 12% 45 10% 40 8% 35 6% 4% 30 Used 2% 25 New 0% 20 Jan-1
Slide 24: Vehicle affordability good
Vehicle affordability good » New car prices have lagged inflation » Weaker currency poses a risk but low interest rates will assist New Car Pricing vs Used Car Pricing vs CPI (Jan 2002 = 100) 190 ― New Car Pr Index Jan 2002 = 100 180 ― Used Car Pr Index Jan 2002 = 100 ― CPI Jan 2002 = 100 170 160 15
Slide 25: Automotive parts and industrial products
Automotive parts and industrial products Revenue (Rm) Operating profit (Rm) Operating Margins +11% +16% 7.3% 7.0% 7.5% 3,862 282 3,477 243 H1 2013 H1 2012 H1 2013 H1 2012 H1 2013 H1 2012 H2 2012 » Overall margin improvement evident » Contributed R3,9bn of turnover and R282m of operating profit » Aut
Slide 26: Automotive Retail
Automotive Retail FAST MOVING _ FORWARD THINKING Y IMPERIAL
Slide 27: Automotive Retail
Automotive Retail Revenue (Rm) Operating profit (Rm) Operating Margins +11% +15% 3.2% 2.7% 2.6% 10 926 9,877 299 261 H1 2013 H1 2012 H1 2013 H1 2012 H1 2013 H2 2012 H1 2012 Good growth in operating profit » New vehicle unit sales 9% up; in line with the industry » Used vehicle sales improved; good g
Slide 28: Financial Services
ep) @) 2 S — © ) GB O Cc G = ic IMPERIAL
Slide 29: Financial Services
Financial Services Revenue (Rm) ( Operating profit (Rm) +18% +43% 491 2,165 1,833 344 H1 2013 H1 2012 H1 2013 H1 2012 Operating profit split Net Underwriting Margins Investment income, including fair value adjustments Underwriting result 9.0% Other Financial Services 7.2% 6.8% 491 431 151 344 95 119
Slide 30: Financial services
Financial services » Excellent performance » Regent Life solid, with gross written premiums up 20% » Adcover, Paintech and Warranties performed well and showed good growth » Overall underwriting margin declined to 7,2% but up on H2 2012 » Affected by severe weather » Investment returns higher; large
Slide 31: Financial Review
ite Financial Review IMPERIAL
Slide 32: Income statement
Income statement Rm H1 2013 H1 2012 % Change Revenue 45 262 38 385 18% » Logistics: +27%; growth mainly from Germany; Lehnkering acquisition » Distributorships: +17%; good growth in annuity revenue streams and used cars » Automotive Retail: +11%; increased new vehicle unit sales » Financial Services
Slide 33: Income statement
Income statement Rm H1 2013 H1 2012 % Change Revenue 45 262 38 385 18% Operating profit 2 939 2 621 12% Operating profit margin 6,5% 6,8% » Strike had an adverse impact in SA Logistics; Car Rental and tourism margins under pressure » Volume pressure in International Logistics; slower German economy
Slide 34: Divisional statistics
Divisional statistics Revenue Operating profit 5% SA logistics 19% 17% 14% 23% International Logistics 10% Car Rental and Tourism 10% 15% 6% Distributorships 4% Automotive Retail 34% 43% Financial Services Operating margin % 22.7 18.8 10.8 9.5 8.3 8.6 6.2 4.6 4.3 4.9 2.7 2.6 SA Logistics Internation
Slide 35: Income statement
Income statement Rm H1 2013 H1 2012 % Change Revenue 45 262 38 385 18% Operating profit 2 939 2 621 12% Amortisation of intangible assets (110) (13) Foreign exchange (losses) / gains 5 - Business acquisition costs (5) (53) Recoupments/(impairments) from sale of properties 19 (38) Gain on sale of fin
Slide 36: Income statement
Income statement Rm H1 2013 H1 2012 % Change Revenue 45 262 38 385 18% Operating profit 2 939 2 621 12% Amortisation of intangible assets (110) (13) Foreign exchange (losses) / gains 5 - Business acquisition costs (5) (53) Recoupments/(impairments) from sale of properties 19 (38) Gain on sale of fin
Slide 37: Income statement
Income statement Rm H1 2013 H1 2012 % Change Revenue 45 262 38 385 18% Operating profit 2 939 2 621 12% Amortisation of intangible assets (110) (13) Foreign exchange (losses) / gains 5 - Business acquisition costs (5) (53) Recoupments/(impairments) from sale of properties 19 (38) Gain on sale of fin
Slide 38: Income statement
Income statement Rm H1 2013 H1 2012 % Change Revenue 45 262 38 385 18% Operating profit 2 939 2 621 12% Amortisation of intangible assets (110) (13) Foreign exchange (losses) / gains 5 - Business acquisition costs (5) (53) Recoupments/(impairments) from sale of properties 19 (38) Gain on sale of fin
Slide 39: Significant minorities' share of earnings
Significant minorities’ share of earnings H1 2013 vs H1 2012 Distributorships International Logistics SA Logistics Other Net Minority earnings 39
Slide 40: Balance sheet
Balance sheet Dec Jun % Dec Rm 2012 2012 change 2011 Property, plant and equipment 8 545 8 080 6 970 Transport fleet 4 399 4 336 3 999 Vehicles for hire 2 688 2 321 2 587 Intangible assets 4 420 4 234 4% 1 921 Other non-current assets 3 115 2 256 38% 1 976 Investments and loans 3 236 2 433 33% 2 604
Slide 41: Balance sheet
Balance sheet Dec Jun % Dec Rm 2012 2012 change 2011 Property, plant and equipment 8 545 8 080 6 970 Transport fleet 4 399 4 336 3 999 Vehicles for hire 2 688 2 321 2 587 Intangible assets 4 420 4 234 4% 1 921 Other non-current assets 3 115 2 256 38% 1 976 Investments and loans 3 236 2 433 33% 2 604
Slide 42: Balance sheet
Balance sheet Dec Jun % Dec Rm 2012 2012 change 2011 Total shareholders’ interest 16 494 15 889 4% 14 954 Interest bearing borrowings 11 088 9 747 8 099 Other liabilities 6 997 6 176 5 167 Equity and liabilities 34 579 31 812 28 220 » Equity Impacted by: • Attributable profits – R1 787m • Exchange g
Slide 43: Gearing
Gearing Net debt : equity (excl. prefs) » Excludes R441m of perpetual % preference shares 60 50 52 » Net D:E below target ratio of 60% - 80% 39 39 40 31 » Moody’s Ratings: 20 • Domestic short term credit rating P-1.za • Domestic long term credit rating A2.za 0 F2009 F2010 F2011 F2012 H1 2013 • Inter
Slide 44: Returns
Returns ROE# ROIC vs WACC 23.4 24 22.0 16.3 16.5 20.3 15.5 20 15 17.1 10-yr 16 avg. of 11.5 12.2 19% 11 12 9.4 10.9 10.5 10.1 8 9.7 8.9 7 4 0 3 F2009 F2010 F2011 F2012 F2013^^ F2009 F2010 F2011 F2012 H1 2013 # based on core earnings ROIC WACC ^^ annualised » ROE is healthy » Objective: Average ROIC
Slide 45: Cash flow – operating activities
Cash flow – operating activities Rm 2012 2011 % Change Cash generated by operations (pre working capital) 4 285 3 842 12% Net working capital movements (1 489) (2 021) -26% Cash generated by operations pre-capital expenditure 2 796 1 821 Net finance costs and tax paid (960) (806) Cash flow from oper
Slide 46: Cash flow – investing activities
Cash flow – investing activities Rm 2012 2011 % Change Net disposal/(acquisition)of subs and businesses 38 (77) Capital expenditure (1 128) (1 001) 13% Expansion (597) (346) Replacement (531) (655) Dividend received from Ukhamba - 387 Net movement in associates and JVs (25) (37) Net movement in equi
Slide 47: Cash flow - summary
Cash flow - summary Rm 2012 2011 Cash flow from operating activities 1 101 170 Cash flow from investing activities (1 969) (901) Cash flow from financing activities (1 361) (757) Shares repurchased (474) - Dividends paid (877) (620) Other (10) (137) (Increase) / Decrease in net debt (2 229) 1 488 Fr
Slide 48: Strategy and Prospects
J aa QEERRRNM oN 2 REEREEERAA » gam ‘if PORWARD THINKING \Y Strategy and Prospects IMPERIAL
Slide 49: Strategy
Strategy » Focused on generating higher returns on capital » Seeking growth opportunities in and adjacent to existing industries and geographies » Focused on expanding our footprint in logistics industry in Africa and abroad • Specific focus on consumer logistics in Africa • Europe to expand around
Slide 50: Recent acquisitions and disposals
Recent acquisitions and disposals » Acquisitions during the period • Midas acquired 80 % of Afintapart SA (Pty) Limited – a commercial vehicle parts distributor • 60% of LTS Kenzam (Pty) Limited - a logistics business that distributes bituminous products throughout Southern Africa • 100% of RTT Heal
Slide 51: RTT Health Sciences acquisition
RTT Health Sciences acquisition 2 110 employees Medical Trans Africa Consumer Health Essentials 2012 Revenue: 2012 EBITDA: Enterprise value: EV/EBITDA 1st year ROIC* R1.1bn R101m R515m multiple: 5.1x (incl. goodwill): 10.0% Earnings enhancing acquisition; meets internal acquisition criteria * Pre an
Slide 52: RTT Health Sciences presence in Africa
RTT Health Sciences presence in Africa Presence in 6 Sub – Saharan countries » South Africa • Jet Park 30 000m2 • Centurion 26,500 m2 » Rest of Africa • Kenya • Nigeria • Ghana • Malawi • Swaziland » Delivers, through agents to 27 further countries across Africa » 2 110 staff members » 26 Trained ph
Slide 53: Rationale for RTT Health Sciences acquisition
Rationale for RTT Health Sciences acquisition » In line with consumer growth strategy in Africa » Compliments Imperial Logistics service offering » Expansion to the growing Nairobi facility (Kenya) Pharma and Healthcare industries » Strengthens exposure to high growth African economies Accra facilit
Slide 54: Prospects
Prospects » Imperial holds leading positions in its main markets » Trading conditions in SA logistics are challenging » RTT acquisition will contribute in second half and enhance our capabilities » African logistics to continue gaining momentum » International logistics – slow down expected, in line
Slide 55: Appendix
A MOVING ¥ FORWARD THINKING YY IMPERIAL SUPPORTING PEOPLE [i TEROUGH NOLIY i Appendix
Slide 56: Key financial ratios
Key financial ratios Ratios H1 2013 H1 2012 F2012 Group operating margin 6,5% 6,8% 7,0% Net D:E ratio (excl. prefs) 52% 39% 39% ROIC^ 15,5% 15,9% 16,3% ROE # 22% 22.5% 23% ^ H1 2013 WACC = 8,9% # Based on core earnings 56
Slide 57: Cumulative sales of vehicle brands distributed
Cumulative sales of vehicle brands distributed 800000 722892 700000 660758 600000 567176 500000 482751 426630 400000 368523 300000 285600 192334 200000 107363 100000 60227 37112 19113 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 YTD Note: Includes AMH, Chery, Foton, Mitsubishi, Rena
Slide 58: Integrated motor value chain
Integrated motor value chain » Finance – JV’s with Nedbank & MFC » Insurance - Regent » Vehicle tracking - Mix » Warranties – Liquidcapital/Regent » Maintenance/Service plans – Liquidcapital » Used Cars – Auto Pedigree, Imperial Select (±60,000 units » Parts & Services revenue p.a) growing faster th
Slide 59: South African vehicle credit growth
South African vehicle credit growth » Credit availability is key for vehicle sales growth » Motor vehicle finance dominates secured credit agreements – 88% » Credit growth in vehicles underpin growth in car sales » Despite moderation in growth, vehicle credit remains in double digit territory Credit
Slide 60: Lower rates and extension of credit terms support demand
Lower rates and extension of credit terms support demand 250,000 4,000 Loan bal up 37% but repayments up only 5% 3,500 200,000 3,000 2,500 150,000 2,000 100,000 1,500 1,000 50,000 500 0 0 Av loan bal Monthly repayment (rhs) Source: NCR,UBSe 60
Slide 61: No of vehicle loans granted per quarter
No of vehicle loans granted per quarter 180,000 160,000 140,000 120,000 100,000 80,000 60,000 Q2-08 Q3-08 Q4-08Q1-09 Q2-09 Q3-09 Q4-09Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 No of vehicle loans granted per quarter Average Source: NCR,UBSe 61
Slide 62: Logistics transport modes across the supply chain
Logistics transport modes across the supply chain Segmentation is based on the supply chain structure of an economy (Road Cost / Rail Cost) In billions Tonkm Imports » Outsourcing Potential Road Domestic • Market size and outsourcing potential Rail Exports • Estimated market size – R155bn • Rail = R
Slide 63: Southern Africa logistics
Southern Africa logistics Prospects » Trading conditions in SA Logistics to remain challenging » Trend to outsourcing to drive future growth » With infrastructure and network, ideally positioned to capitalise on growth opportunities » Expansion into Africa will continue gaining momentum » RTT Health
Slide 64: Share of German OEM's in World Cars Production: 18,4 %
Share of German OEM’s in World Cars Production: 18,4 % » 12% of International Logistics revenue generated from auto industry » Activities include in-plant logistics and sub-assembly of components in manufacturing plants » German OEM’s outperforming the global average in production – good exposure to
Slide 65: International logistics
International logistics Prospects » Future performance to be impacted by slowing German economy » Lehnkering to have a positive impact on results as it will make a contribution for the full year » Businesses remain well positioned in attractive niches in the logistics industry in Germany » Acquisiti
Slide 66: Car Rental and Tourism
Car Rental and Tourism Prospects » Conditions in car rental and tourism will continue to be tough » Improvement expected in used car market as price differential between used and new cars widen » Inbound travel demand expected to be slow Strategic objectives » Improve return on invested capital » Ma
Slide 67: Distributorships
Distributorships Prospects » While inventory position has improved, product supply remains tight but stable » Continue benefiting from growth in parts and service revenue streams as the car parc of imported brands grow » Autoparts should perform solidly in competitive market » Goscor will capitalise
Slide 68: Automotive Retail
Automotive Retail Prospects » Outlook for new vehicle sales is for a slower growth » Well balanced portfolio – ideally positioned to take advantage of any growth opportunities presented by market » Used car market should improve further Strategic objectives » Target best in industry ROIC & operating
Slide 69: Financial Services
Financial Services Prospects » Earnings in Financial Services division should be robust » Increasing annuity income due to new business being placed on its book » Investment portfolio continues to be conservatively managed despite increased exposure to equity markets Strategic objectives » Increase
Slide 70: A MOVING ¥
A MOVING ¥ FORWARD THINKING YY IMPERIAL SUPPORTING PEOPLE [i TEROUGH NOLIY i