Imperial plots growth from drugs to drones

Johannesburg - Imperial Holdings [JSE:IPL] is planning an international expansion of its drones to pharmaceuticals-delivery business as South Africa’s sixth-largest company seeks to capitalise on growth opportunities and offset the impact of a weak rand.

The company’s logistics division, which has operations ranging from the distribution of prescription drugs in Africa to inventory-taking drones in Europe, will be the main growth driver of the business, CEO Mark Lamberti said in an interview this week.

“The logistics business will become an increasingly global business,’’ Lamberti said at the company’s Johannesburg head office. “This will be a major growth vector and that will be mainly off the continent.’’

Lamberti’s work on simplifying the company and selling assets in his two years at the helm has effectively divided Imperial in two, with the other half being a vehicles business that includes importing, dealerships and rental operations in sub-Saharan Africa. The import division has been affected by the weaker rand, which fell 25% against the dollar last year, due to the rising cost of buying in international markets, Lamberti said.

As the structure of the group becomes clearer, analysts and shareholders are asking whether Imperial could split the logistics and vehicles operations into two separate companies, Lamberti said.

“I’m not ready to answer that yet, there’s work to do,’’ he said. “But that is the obvious question.’’

Imperial shares gained as much as 7.2% to R151.62, a four-month high, and traded 2.1% higher at 11:07 in Johannesburg. The stock has increased 21% this year, valuing the company at R29bn.

Since the founder of South African retailer Massmart Holdings became CEO in March 2014, Imperial has announced R4.7bn of disposals and it will probably sell about another R3bn of assets by the end of this year, he said, at least half of which will be in real estate. In another move to simplify the company, the vehicle-related divisions are being combined into a single unit, which Lamberti says is the largest business of its kind in Africa.

Imperial shares have declined 15% in Johannesburg since Lamberti became CEO, compared with an 8.2% gain by the FTSE/JSE Africa All Shares Index. The stock has been affected by investor concern about the depreciation of the rand, which will become less of an impact as other parts of the business expand faster, he said.

In its Africa logistics business, the company buys pharmaceuticals and fast-moving consumer goods from manufacturers and acts as a distributor to local vendors, in addition to basic transportation and warehousing operations. Its strategy is to buy established local businesses and keep their management in place, Lamberti said.

“We have built a R6bn business in Africa almost under the radar, we’ve done it in five years,’’ he said.

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