Johannesburg — HAS Imperial, which once enjoyed blue-chip status, finally reached its nadir?

If its share price is any guide, analysts believe the transport and logistics group has stabilised after going through a rough patch that slashed its market capitalisation to about R11bn now from about R37bn in February last year.

BoE Stockbrokers analyst Barbara Price-Hughes says "a lot of bad news is already priced into the share".

An analyst, who requested anonymity, says the share price is showing some support, but cautions that it is difficult to tell whether the share has hit the bottom yet.

The share price plummeted to a new low of about R43 in July and since then it has found support at about R47.

In June last year, the share stood at about R141 before the company embarked on a major restructuring programme, which sought to unload noncore assets, cut costs and reduce debt.

The financial results last week may have strengthened investors' conviction about Imperial's ability to ride out of the current tumultuous business cycle.

Macquarie First South Securities analyst Fabrice Ndjodo says the brokerage house has upgraded its recommendation on Imperial from underperform to neutral.

The anonymous analyst says the latest annual results are "positive" considering how tough economic conditions are and how these conditions have eroded consumer sentiment.

Interest rates at 15,5% and inflation at 13% have left consumers struggling to keep up with their debt payments and have hurt their discretionary income, hurting consumer- sensitive companies like Imperial in the process.

On the challenge Imperial faces ahead, Price-Hughes says "the pressure is on". She says vehicle sales are severely under strain as Imperial derives most of its revenue from motor-related businesses: distributorship and car dealership.

"With 60% of revenue and 40% ebit (earnings before interest and taxes) directly exposed to motor retail, we believe Imperial will be negatively affected by these trading conditions," says Ndjodo.

But the analyst says Imperial has moved "pretty quickly" to deal with its problems.

It has shut down its loss-making Commercial Vehicle Holdings and aviation business (realising R803m and R1,3bn respectively), written off equity investment in Renault SA, written off a further R308m related to black empowerment partner Lereko Mobility, and made a R182m provision against a loan to Imperial share trust.

It has unbundled its capital equipment and leasing unit, Eqstra, and sold its UK-based business, Imperial Multipart.

It looks set to dispose of its 66% holding in Tourvest this month and its aviation business within the next six months.

These restructuring steps have cleaned up the balance sheet.

The analyst says the business is in "good shape", albeit under harsh circumstances.

Net interest-bearing debt has dropped significantly to R8,5bn now from R14,7bn in December last year. Gearing has improved as well, standing at 81% against 119% several months ago.

Imperial - which was kicked out of both the JSE industrial 25 index and the elite top 40 index this year -- is even contemplating acquisition opportunities.

"Acquisitions and greenfields operations in, and complementary to, our existing operations will be carefully pursued together with an emphasis on optimal capital management," the company said in its annual report last week.

It has already strung together some local and international acquisitions.

The company has also boosted its capital expenditure, raising it to R1,59bn this year from R1,27bn last year. Most of the capital will be invested in the logistics division, which, as Price-Hughes notes, "is still doing well".

"With a healthier balance sheet resulting from the completion of its restructuring programme, we believe Imperial is well positioned to benefit from the upturn in the cycle when it occurs," Ndjodo says.

But the dark cloud has not lifted over Imperial.

"We believe the next 12 months will still be challenging for the motor retail sector because South African consumers remain saddled with high levels of debt that they need to service at high interest rates," Ndjodo says.

However, the anonymous analyst says the "definite catalyst" for Imperial's turnaround is inflation.

Once inflation shows signs of cooling down and eventual easing, the share price may bounce back, he says.

Whether easing inflation would translate into improved earnings remains to be seen.

But Macquarie First South Securities appears to have made a call.

"We believe Imperial has become attractive to value investors on a minimum two-year horizon," Ndjodo says.