|
|
|
|
'We breed entrepreneurs. We decentralise business policy and allow management to develop with minimum interference from head office and no bureaucracy'
Imperial's riches come from letting people rule themselves
The high-flying group has delivered a 79,11% return to shareholders over the past five years, writes DON ROBERTSON
Last year's earnings showed a polished 48% improvement, similar to those achieved in the previous year, and, together with earlier substantial growth, gave the group a 79,11% return to shareholders over the past five years. For the record, turnover soared to R6,4-billion in the year to June from R2,6-billion in the previous year with the acquisition of the Sakers/Saficon/Boumat business included for the first time. Attributable profit rose to R245,8-million from the R121,7-million earned in 1995, equivalent to earnings of 169,8c on the share capital, increased by the R1-billion rights issue, against 115,1c. Total dividends were lifted to 68c a share from 45c. Since 1987, turnover has shown a compound growth of 45%, pre-tax profit has grown by 50%, earnings a share by 41%, dividends by 39%, market capitalisation by 68% and taxed profits by 60% before extraordinary items. With a market capitalisation of almost R8-billion, Imperial is the 15th largest group in South Africa. Imperial has been one of the high-fliers in the stock market since its listing. It has persisted with a policy of strategic acquisitions over the years, all of which have proved extremely successful. It is highly sought after by financial institutions who have benefited from the focused management team. With Saficon now bedded down after a few early hiccups related to margins, this acquisition should provide an additional base for short- and long-term growth, particularly to the financial services division. The Saficon purchase also gave Imperial a 49% interest in the building group Boumat, which produced disappointing results in the 15 months to June, largely because of the slow progress of the government's low-cost housing projects. A solid turnaround can be expected in the current financial year. Also bought was the Cape Town-based Porters motor group, now a subsidiary after the investment was increased to 58%. Porters has been streamlined and should produce better results this year. Chairman Bill Lynch, last year's Sunday Times Businessman of the Year, is confident that growth will be maintained. "We believe that the industries in which we operate are large and dynamic enough for us to achieve further substantial growth, and we intend to continue to practice bold and considered entrepreneurship in developing further opportunities in our chosen fields. "Because of our strategic position and vertical integration in dynamic industries, we are budgeting for good growth in the year to June 1997 from our present high base." The financial services division contributed 35% to group profits last year and will continue to be the major growth sector in future, says Lynch: "There is a lot of capital in this division and although it is small at present, it operates in big markets and will, therefore, be an area for strong and dynamic growth." Regent Insurance should record good growth in premium income in the current year, while Regent Life is gaining market acceptance as a leading innovator in the credit life assurance sector. Underwriting profits are expected to continue, says Lynch. Imperial Bank, with a capital base of R250-million, produced pleasing results last year, says Lynch, and has the potential to make a major contribution this year. It plans to extend its operations outside its normal activities through financing aircraft and trucks. The investment portfolio should provide long-term growth while the treasury and property operations should increase profits. The motor division ran into difficult trading conditions in the second half of last year because of the decision by motorists to buy down and increased competition between local manufacturers and importers. In addition, used-vehicle sales were affected by lower priced entry-level cars and this has left dealers with excess stock. Pre-tax margins were accordingly trimmed to 1,8% from 2,9% in 1995. Lynch believes that higher motor stock levels will be reduced only by the middle of next year. In the current year an improvement is expected through rationalisation and tighter asset management, in spite of stiff competition and pressures on margins. The R286-million recently spent in the transport division should reap benefits in the years ahead. Improved growth is forecast in the car rental, while increased foreign travel should produce better results for coach company Springbok Atlas. Sound prospects are forecast for the various leasing operations. The secret of Imperial's success over the years is difficult to ascertain from the self-effacing Lynch. "We put together concepts to work with and to create an integrated structure. We then decentralise business policy and allow managements to develop within their own culture, with minimum interference from head office and no bureaucracy. As a result, we breed entrepreneurs," he says. He says Imperial is a good example of the how the free market system can create wealth. On its listing on the JSE in 1987, the market capitalisation of Imperial was R38,5-million, held by a few families and institutions. Today, this value is almost R8-billion in the hands of 3 245 shareholders. During the same period, employment grew from 1 720 to 17 000 people, including associates, while most of the profits have been reinvested in the expansion of the business.
|
