4.0 - Imperial

company Overview
Chairman’s report
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ceo’s report
Operational reviews
financial Directors Report
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corporate governance
Highlights
• Against a weak motor market, cost
management and rationalisation
protected margins and limited
decline in revenue
• Revenue from services maintained,
in line with group strategy of
focusing on service operations
• Australian dealerships recorded net
profit after interest
• Good results from aircraft sales
activities
Macro drivers
• Economic growth
• Interest rates
• New consumers
• Currency movements
• Regulatory landscape
Risks
• Interest rate increases
• Exchange rate volatility
• Renewal of long-term
distribution agreements
• Availability of consumer credit
Performance drivers
• New vehicle sales
• Cost containment and
overhead absorption
• Sale of value-added products
• Working capital management
• Volume throughput
• Gross margin management
Strategies
• Expand value-added product
sales and downstream profit
opportunities
• Improve customer satisfaction
• Build vehicle parque in brands
• Maintain good relations with
suppliers
Results
AMH responded effectively to the extremely
weak motor market by cutting costs and
closing unprofitable operations in the last
quarter of 2008. Seventeen sales outlets
were closed in the first half of the review
period and, regrettably, headcount reduced
by approximately 800. As a result, margins
recovered well in the second half for the
division as a whole, despite revenue being
lower than the first half of the year.
New car sales volumes in AMH declined
by slightly more than the market given that
entry-level products were worst affected by
the scarcity of bank credit. Any increase in
risk appetite by banks will benefit this subsegment.
Dealership closures cost approximately
R30 million, resulting in annualised savings
of over R100 million. This rationalisation will
position the business correctly for a vehicle
market that is likely to remain weak for the
foreseeable future.
Currency fluctuations throughout the period
had a marked impact on results. The rand
was weak for most of the period, which was
partly offset by price increases and some
manufacturer assistance. However, benefits
from the recent strengthening of the rand
have already started to flow.
In line with our stated strategy of focusing
on service operations, the division held its
revenue from services at R1 214 million
against R1 286 million last year while total
revenue declined by 13%.
The Australian dealerships made a net profit
after interest, even without a once-off VAT
recovery of R25 million realised in the first half.
NAC posted good results, as aircraft
sales were maintained and other activities
contributed well. However, the forward order
book is lower, which will put pressure on next
year’s results. As the leading general aviation
sales organisation in Africa, NAC benefits
from some stability in demand from African
governmental agencies.
The auto parts business improved strongly
over last year and returned solid results.
Trading conditions in our joint venture with
Renault remained difficult, and we advanced
a secured shareholder loan of R75 million to
Renault SA in the first half of the review period.
imperial holdings limited Annual Report 2009 23