Imperial falls on unsatisfactory performance


Imperial falls on unsatisfactory performance


Published Date: 2019-06-04 | Source: Stephen Gunnion | Author: Stephen Gunnion

Imperial falls on unsatisfactory performance

The logistics group has reported weak operational performances will impair its Consumer Packaged Goods business as it rationalises its operations.

Imperial Logistics' shares sank as much as 10.5% after it warned investors that it was likely to report lower profits this year due to weaker operational performances from its SA and International operations, as well as once-off costs from a rationalisation of its business. And it plans to impair its Consumer Packaged Goods (CPG) business in SA by at least R1 billion.

In a pre-close briefing and trading update, the logistics group said it had delivered an "unsatisfactory performance" for the nine months to end-March, primarily in its SA and International divisions. Its performance was impacted negatively by challenging economic conditions and the cost of a business restructuring. It has also decided to rationalise its CPG business by exiting and selling assets and shifting key contracts into other business units. It said this would result in an after-tax impairment of between R1 billion and R1.4 billion.

Revenue from continuing operations for the nine-month period was higher but operating profit declined. The group grew first-half revenue from continuing operations by 6% to R26.6 billion, while operating profit of R1.3 billion was in line with the previous year.

Imperial said persistently poor economic conditions and ongoing uncertainty weighed on its performance in SA, which will generate about 30% of this year's revenue. And it warned that there would be no short-term recovery in conditions. Excluding the CPG business, it said its SA division had grown operating profit by 5% over the last three years.

It described the performance at its African operations outside SA as excellent, with growth in revenue and operating profit supported by good results in its healthcare and consumer businesses. It expected the region to generate about 23% of group revenue.

Its International operations will generate about 47% of revenue but have been affected by slowing economic activity in Europe, specifically Germany. In the UK, the ongoing Brexit uncertainties had depressed consumer demand and activity.

The group said headline earnings per share for the full year would be down on last year as a result of the weaker operational performance and the once-off costs. It said its liquidity position remained strong with R9.5 billion of unutilised banking facilities.

Despite mixed trading conditions across regions, Imperial said it continued to renew more than 90% of existing contracts across its divisions and had an encouraging pipeline of new opportunities. It secured new business revenue of about R5.2 billion over the past 12 months, which would come through in its 2020 financial year.

Its shares recovered some of their losses to close 5.1% down at R57.10.


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