Imperial Holdings

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(No Transcript)
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AGENDA

• Overview
• Group Results
• Divisional Results
• Strategy
• Conclusion

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IMPERIAL TODAY
Strengths

• Market leading positions
• Strong platforms for future growth
• Positioned in industries experiencing structural
  but cyclical growth
• Significant annuity income streams
• Entrepreneurial culture to drive next growth phase

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SALIENT FEATURES
H1 FY 2008
Change
Continuing operations
550.6 cents
(19.4)
Headline earnings per share
R31.7 bn
3.7
Revenue
R1.25 bn
(15.0)
Net profit
(R1.6 bn)
Discontinued operations
(R500 m)
Profit attributable to shareholders
H1 FY 2008
H1 FY 2007
R3.1 bn
R3.3 bn
EBITDA
10.2
10.5
EBITDA margin
R2.2 bn
R2.3 bn
Operating profit
7.4
7.3
Operating margin
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DISCONTINUED OPERATIONS - AVIATION
6
DISCONTINUED OPERATIONS - CVH (Tyco)
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Group Results
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INCOME STATEMENT EXTRACTS
106
(1 583)
Discontinued operations trading income and fair
value loss
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INCOME STATEMENT EXTRACTS
106
(1 583)
Discontinued operations trading income and fair
value loss
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INCOME STATEMENT EXTRACTS
1 250
106
Discontinued operations trading income and fair
value loss
(1 583)
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INCOME STATEMENT EXTRACTS
106
(1 583)
Discontinued operations trading income and fair
value loss
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INCOME STATEMENT EXTRACTS
106
(1 583)
Discontinued operations trading income and fair
value loss
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BALANCE SHEET EXTRACTS
14
BALANCE SHEET EXTRACTS
15
BALANCE SHEET EXTRACTS
H1 FY 2007
H1 FY 2008
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BALANCE SHEET EXTRACTS
17
BALANCE SHEET EXTRACTS
18
CASH FLOW
19
CASH FLOW
(542)
(683)
Payments to shareholders
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CASH FLOW
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CASH FLOW

• No interim dividend recommended
• Intention to resume dividend policy at year end
• R1.2 bn IPL2 Bond settled mainly from internal
  sources, balance from bank facilities
• Extensive liquidity facilities available

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CASH FLOW
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Divisional Results
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DIVISIONS
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LOGISTICS South and Southern Africa
Operating margin
of group
?
Rm
2007
Revenue
12
14.6
4618
2008

• Increased margin despite 31 higher fuel price
  which increased revenue by R91
  million without an increase in
  operating profit
• FMCG (primarily non-durables) distribution
  business contributes 38 to revenue
• Steady performance for the half year
• Possible moderation from second half, overall
  growth still positive
• Urgent attention was given to isolated problem
  areas and working capital position
• Steady increase in penetration into higher value
  added services
• Large blue chip customer base

Operating profit
7.9
14
16.0
368
8.0
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IMPERIAL LOGISTICS INDUSTRY PRESENCE
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LOGISTICS Europe
Operating margin
of group
?
Rm
2007
21
12.3
Revenue
2008
3898
Operating profit
3.2
83
8.1
4.8
187

• Good performance of German economy, particularly
  steel and auto
• Excellent half year extra month contributed R15
  m to attributable profit
• All divisions - inland waterways, bulk and
  container terminals and Panopa Logistics
  performed well
• Three new acquisitions Laabs and Food Tankers
  (liquid bulk transport in Europe) and Rijnaarde,
  inland waterway chartering in the Netherlands
  started positively
• Exciting new developments planned
• 25,000 m² spare parts centre in Herten
• expansion of the terminal facilities in Cologne
• doubling of container space in Düsseldorf and
  Duisburg
• two new container terminals in the Lower Rhine
  region
• expansion of inland waterway fleet

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LEASING AND CAPITAL EQUIPMENT
Operating margin
of group
?
Rm
2007
2008
3314
10.5
55.2
Revenue
27.6
53.0
635
Operating profit
19.4
19.2

• Capital equipment business the main contributor
• All major contracts performing well
• Attractive new large contracts won
• Strong demand and high utilization in plant hire
• Terex and New Holland distributorships gained
  momentum
• The passenger and commercial vehicles in rest of
  Africa performed well, although partially from
  de-fleeting
• New opportunities being pursued in Botswana,
  Nigeria, Rwanda and Swaziland
• Good growth from SA leasing - units growing by
  13 y-o-y

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CAR RENTAL
Operating margin
of group
?
Rm
2007
2008
1362
4.3
24.2
Revenue
8.1
12.0
186
Operating profit
15.1
13.7

• Operating margins in car rental business
  maintained
• Rental days 11 up, pre-tax profit 5 up due to
  higher interest cost
• Divisions results exclude Tourvest
• Major brand repositioning after long term renewal
  of Europcar franchise
• Exclusive in and outbound referral agreements
  with National and Alamo
• New business from government, construction and
  energy, and low cost airlines
• Good revenue growth but lower margins in Auto
  Pedigree
• Springbok Atlas sales 16 up, working closely
  with 2010 LOC
• New markets developed in China, Taiwan, Portugal,
  Spain and Middle East

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DISTRIBUTORS
(AMH, UK and SA parts businesses, NAC and
Australian dealerships)
Operating margin
of group
?
Rm
2007
2008
8318
26.3
(10.8)
Revenue
19.5
(27.5)
448
Operating profit
6.6
5.4

• Difficult trading in AMH due to interest rates
  and NCA
• Appropriate measures were taken to streamline the
  business to ensure
  future acceptable returns whilst exploring
  opportunities for growth
• NAC performed well as previous problem areas in
  the contracts and maintenance divisions have been
  rectified - good aircraft sales and order
  book
• Reconsidering the future of UK parts activities

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DEALERSHIPS
Operating margin
of group
?
Rm
2007
2008
9958
31.4
(3.0)
Revenue
9.7
(16.8)
223
Operating profit
2.6
2.2

• Pressure on the affordability of new and used
  vehicles
• Weak market to be seen against three prior years
  of extraordinary growth in vehicle sales
• Investment in new facilities continued as we are
  confident that the market will turn and parts and
  service operations will continue to grow
• Margins on used vehicles now starting to improve
• Well represented in commercial vehicles where
  demand remains high
• Satisfactory performance from UK DAF dealerships

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INSURANCE
(Regent Insurance, Regent Life and Imperial Re)
of group
?
Rm
1317
4.2
(16.7)
Revenue
8.8
(46.1)
202
Operating profit

• Decline in premium income
• NCA (monthly instead of annual or term policies)
• downturn in the motor market
• Regent Insurance premiums steady but Regent Life
  47 down
• Number of policies written now almost back to pre
  NCA level, however lapses rose
• Underwriting results remained strong - combined
  underwriting result 62 higher at R139 million
• Investment income down on weak equity markets
• Year-on-year difference in investment income had
  a major impact on group profitability

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PRIMARY ASSOCIATES
H1 FY 2007
H1 FY 2008
127
104
Imperial Bank
(1)
(87)
Renault
38
25
Discontinued operations
43
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Other
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Strategy
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OVER-RIDING STRATEGIC IMPERATIVES

• Rationalise portfolio to create a more coherent
  group of businesses
• Bolster groups financial strength through
  disposals and unbundling
• Focus on capital discipline and returns
• balance growth and return targets
• drive returns through focusing on increased
  utilization of existing assets/investments
• focus on capital allocation and return
  optimization at business unit level
• Pursue asset-light opportunities that are
  adjacent to current businesses

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STRATEGIC STEPS

• Rationale for completed and soon to be realised
  divestments
• Underperformance
• CVH
• Aviation
• Capital intensive businesses
• Leasing and capital equipment
• Aviation
• Strategic fit
• Tourvest

Low growth / weak profitability
Consumed disproportionate amount of capital
Subscale and complex with limited synergies
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STRATEGY WHATS THE MARKET OPPORTUNITY?
Corporate/ Industrial
Consumer
MOTOR AND FINANCIAL SERVICES
CAR RENTAL AND TOURISM
LOGISTICS

• Customer Requirement
• People facilitate vehicle ownership and
  financial security
• Imperials Solution
• Broad range of vehicles integrated with value for
  money financial products
• Key Drivers
• Relatively underdeveloped public transport
  infrastructure
• Higher levels of economic participation/activity
  and credit extension
• Growing ownership bias given status and safety
  implications
• Further benefits from integrated retail and
  financial services

• Customer Requirement
• Materials and products management, planning,
  storage and delivery
• Imperials Solution
• End-to-end across the logistics chain
• Key Drivers
• Market increase in industrial and construction
  activity
• Step-change in scale of consumer/retail market
• Secular shift towards outsourcing and supply
  chain management

• Customer Mobility Requirement
• People facilitate vehicle useage and transport
  of tourists
• Imperials Mobility Solution
• Large, branded and accessible vehicle rental and
  coach network
• Key Drivers
• Relatively underdeveloped public transport
  infrastructure
• Continued growth in international inbounds (incl
  WC 2010)
• Rapid emergence of domestic business
  travel/leisure market

CAPITAL
OPERATING PROFIT
CAPITAL
OPERATING PROFIT
CAPITAL
OPERATING PROFIT
R5 886 34
R575m 34
R9 598m 55
R873m 54
R1 965m 11
R186m 12
Based on December 2007 interim results
excluding head office and eliminations
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LOGISTICS STRATEGY
TRADITIONAL SERVICE OFFERING
Inbound transportation
Warehousing
Distribution
ENVISAGED SERVICE OFFERING
System integration
Inbound transportation
Freight forwarding clearing
Procurement
Production planning
Packaging Merchandising
Inventory management
Warehousing
Distribution
Potential areas of asset-light opportunity
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INTERNATIONAL STRATEGY

• Focus on familiar businesses (motor and European
  logistics) with adequate returns instead of
  turnaround opportunities
• Imperial Logistics International has
• highly sought-after bulk and container terminals
• important inter-modal transport solutions
• an inland waterway transport business of
  considerable scale, and
• a highly sophisticated 4PL business
• Steadily building on UK dealership base
• Returning Australian dealership group to
  profitability

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LEASING AND FLEET MANAGEMENT (EQSTRA) - UNBUNDLING

• Refine business focus of Imperial and reduce
  exposure to capital intensive businesses
• Create a new listed entity with a sharp focus on
  capital intensive leasing and infrastructure
  related activities
• Capitalise on fixed investment spending and the
  demand for commodities
• Attract higher leverage than Imperial as a whole
• Unlock balance sheet capacity and growth
  potential for Imperial and Eqstra

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EQSTRA UNBUNDLING

• Status
• Timing
• Funding of Eqstra
• Expected gearing levels
• Future of Imperial Capital
• Treasury functions
• Board

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ILLUSTRATIVE PRO FORMA BALANCE SHEET AFTER
UNBUNDLING
2007 after the unbundling pro forma
2007 Unbundling Adjustments
Rbn
2007 before Unbundling
1.0
-
Intangibles
1.0
2.4
-
Investments in associates and joint ventures
2.4
5.4
(0.3)
Property, plant equipment
5.7
3.1
-
Transport fleet
3.1
0.3
(5.4)
Leasing assets
5.7
1.5
0.1
Vehicles for hire
1.4
3.7
(0.3)
Investments, loans and other non current assets
4.0
-
Net assets held for sale
2.8
2.8
4.1
(1.3)
Net working capital
5.4
24.3
(7. 2)
31.5
10.3
(2.0)
Shareholders funds
12.3
0.4
-
Perpetual preference shares
0.4
1.6
-
Insurance funds
1.6
2.0
(0.5)
Financial and other liabilities
2.5
10.0
(4.7)
Net interest-bearing debt (net of cash)
14.7
24.3
(7.2)
31.5
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ILLUSTRATIVE DEBT (PRO FORMA)
Debt/equity
Equity
Debt
R bn
Net debt
120
14.7
12.3
Estimated proceeds from disposals
0.6
(3.4)
Reduction due to unbundling
(2.0)
(4.7)
Pro forma debt position after restructuring
61
6.6
10.9
Majority to be received within 24 months.
Balance over 5 years
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Conclusion
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STRATEGY SUMMARY

• Underlying drivers of current initiatives
• fix, sell or close underperforming businesses
• achieve healthy, sustainable returns
• focus on simple, logical business groupings

• Strategy
• focus on balancing growth and return/efficiency
  targets
• increase returns through asset-light activities
  in adjacent business sectors

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OUTLOOK

• Difficult trading conditions will continue in the
  short to medium term
• Logistics and Eqstra to continue performing well
  with some moderation
• Car rental will carry once-off costs of
  rebranding
• Balance sheet capacity freed up
• Opportunities for growth will be pursued
  selectively
• Imperial exposed to strongly growing sectors

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QUESTIONS
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Appendix
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SCALE OF OPERATIONS
Change
H1 FY 2008
H1 FY 2007
Vehicles sold
(18.3)
50 141
61 404
- New
- Used
(0.2)
34 507
34 592
Owned fleets
(0.2)
41 447
41 521
- Passenger and light commercials
4.5
10 910
10 441
- Forklifts
11.2
6 196
5 573
- Trucks
26.4
1 555
1 230
- Earth moving equipment
Invested in future expansion
(6.3)
R2.09 bn
R2.23 bn