Imperial Logistics — Investor Day (May 2017)
42 slides from Imperial Logistics's investor day presentation, May 16, 2017
Slide 1: Pre Closed Period Update
PRE CLOSED PERIOD UPDATE Investment Community 16 May 2017
Slide 2: Agenda
AGENDA OUR GUIDANCE WHAT HAS STRATEGIC STRATEGIC CONCLUSION QUESTIONS CHANGED? CHALLENGES RESPONSE 2
Slide 3: Agenda
AGENDA OUR WHAT HAS STRATEGIC GUIDANCE CHANGED? CHALLENGES STRATEGIC CONCLUSION QUESTIONS RESPONSE 3
Slide 4: 2017 Guidance by Sub-Division
2017 GUIDANCE BY SUB-DIVISION IMPERIAL LOGISTICS South Africa > UNCHANGED – We expect growth of revenues & operating profit African Regions > UNCHANGED – We expect a decline in revenues & operating profit attributable primarily to the impact of currency movements on volumes, margins and translation
Slide 5: 2017 Guidance for Imperial Group
2017 GUIDANCE FOR IMPERIAL GROUP > UNCHANGED – We expect the Imperial group to achieve a single digit increase in revenues & unchanged operating profit for the year to 30 June 2017 > A significant increase in foreign exchange losses & higher financing costs will depress headline earnings > Guidance
Slide 6: Agenda
AGENDA WHAT HAS OUR GUIDANCE STRATEGIC STRATEGIC CONCLUSION QUESTIONS CHANGED? CHALLENGES RESPONSE 6
Slide 7: What Has Changed – Macro
WHAT HAS CHANGED – MACRO Heightened global uncertainty: > Economic • Brexit > weakening £ & UK GDP growth • Trump “America First” presidency > effect on global trade • China restructuring > effect on commodity consumption • Global reflation > rising real growth & inflation > Geopolitical • North Kor
Slide 8: What Has Changed – RSA
WHAT HAS CHANGED – RSA > Sovereign rating downgrade (more to come?) > Lower than expected GDP growth (0.3% in 2016; revised down to <1% in 2017) > Rand deterioration limited by strong inward EM flows > Drought broken (WC?) > Rising social tensions • Marked increase in frequency & lawlessness of serv
Slide 9: What Has Changed – IPL Specific Factors
WHAT HAS CHANGED – IPL SPECIFIC FACTORS South Africa (59% revenue; 64% operating profit) > Volatile Rand resulting in foreign exchange hedging losses & higher priced inventory > Continued decline in national new vehicle sales resulting in reduced demand > Lower than expected economic growth > Low bu
Slide 10: What Has Changed – IPL Specific Factors (Cont.)
WHAT HAS CHANGED – IPL SPECIFIC FACTORS (CONT.) Eurozone, UK & Australia (32% revenue; 20% operating profit) > Low water levels on Rhine > Lower demand & pricing pressures in steel, energy, commodities & construction sectors in Germany > Steady UK economy supporting logistics & vehicles businesses (
Slide 11: What Has Changed – IPL Sectors
WHAT HAS CHANGED – IPL SECTORS > Logistics • Managed logistics • Consumer, auto contract logistics, pharma distribution • T&W, consulting, shipping, chemicals, FMCG distribution • More competitive • Greater currency effects > Vehicles • Rentals, SUV/crossover, financial services • Aftermarket parts,
Slide 12: What Has Changed – IPL Restructuring
WHAT HAS CHANGED – IPL RESTRUCTURING > Portfolio • In calendar 2017 – the South African Competition Tribunal approved the sale of the Regent to Hollard (24 April) for approximately R1.8 billion, including the Regent Africa proceeds. Imperial will retain the value added products business 12
Slide 13: Regent Transaction Evolution
REGENT TRANSACTION EVOLUTION > On 29 September 2015 announced sale of Regent Life & Regent Short Term to Hollard who would then on-sell the VAPS portion of the business to MotoVantage, with Imperial participating in the VAPS revenue & profit streams. > Although VAPS are an integral part of the motor
Slide 14: Regent Transaction Structure
REGENT TRANSACTION STRUCTURE 14
Slide 15: Regent Transaction Objectives
REGENT TRANSACTION OBJECTIVES > Imperial’s original objectives were achieved • The Life & Short-term insurance licenses & businesses unrelated to Imperial’s logistics or vehicle divisions have been sold • Imperial retains access to the revenue streams derived from our VAPS business through our cell
Slide 16: Motus Financial Services Structure
MOTUS FINANCIAL SERVICES STRUCTURE 16
Slide 17: What Has Changed – IPL Restructuring
WHAT HAS CHANGED – IPL RESTRUCTURING > Portfolio • In calendar 2017 – the South African Competition Tribunal approved the sale of the Regent to Hollard (24 April) for approximately R1.8 billion, including the Regent Africa proceeds. Imperial will retain the value added products business – 34 non-str
Slide 18: What Has Changed – IPL Restructuring (Cont.)
WHAT HAS CHANGED – IPL RESTRUCTURING (CONT.) > Structure • Two clearly defined increasingly self sufficient divisions, Imperial Logistics & MOTUS, focussed respectively & exclusively on the vehicle & logistics supply chains under separate boards & management (numerous intra divisional structural cha
Slide 19: Drivers of Performance – Harvard Study
DRIVERS OF PERFORMANCE – HARVARD STUDY 4 Primary Practices • A well-defined clearly communicated strategy • Operational execution that consistently meets customers expectations • Creating a high-performance, high-values culture • A structure that simplifies working in and with the organisation plus
Slide 20: What Has Changed - Imperial's Drivers of Performance
WHAT HAS CHANGED - IMPERIAL’S DRIVERS OF PERFORMANCE 4 Primary Practices IPL ’15 IPL ‘16 IPL ‘17 Rating ‘17 Harvard Sample Strategy 3.3 3.5 3.7 3.7 Execution 3.6 3.6 3.6 3.7 Culture 3.5 3.7 3.9 3.7 Structure 3.8 3.6 3.5 3.5 Any 2 of 4 Secondary IPL ‘15 IPL ’16 IPL ‘17 Rating ‘17 Harvard Practices Sa
Slide 21: Agenda
AGENDA STRATEGIC OUR GUIDANCE WHAT HAS STRATEGIC CONCLUSION QUESTIONS CHANGED? CHALLENGES RESPONSE 21
Slide 22: Imperial's Strategic Challenges
IMPERIAL’S STRATEGIC CHALLENGES > Impact of disruptive technology & innovation on logistics & vehicle sectors > High market shares in logistics & vehicles in structurally low growth RSA > Impact of currency volatility on competitiveness & performance > Impact of weakening Rand on working capital, co
Slide 23: Imminent Threats
IMMINENT THREATS > Zupta government > RSA ratings downgrade / recession > Rand volatility > Brexit fallout 23
Slide 24: Agenda
AGENDA OUR GUIDANCE WHAT HAS STRATEGIC STRATEGIC CONCLUSION QUESTIONS CHANGED? CHALLENGES RESPONSE 24
Slide 25: Path to Value Creation
PATH TO VALUE CREATION > Clarify the portfolio • What businesses are we in? What sectors do they occupy? What capital characteristics do they have? What capital characteristics do we want? • Disposals & acquisitions > Structure the portfolio • Sectoral grouping (i.e. similar skills / counterparties
Slide 26: Imperial Holdings – Value Creation
IMPERIAL HOLDINGS – VALUE CREATION Strategic Thrust 1 • Devolve divisional portfolio & competitive strategies to Divisions Strategic Thrust 2 • Ensure Divisions have appropriate management for performance, succession & transformation Strategic Thrust 3 • Embed & devolve Organisation Effectiveness pr
Slide 27: Capital Allocation Strategy
CAPITAL ALLOCATION STRATEGY > We will release capital & sharpen executive focus, by disposing of non-core, strategically misaligned, underperforming or low return on effort assets > We will invest capital in South Africa to maintain the quality of our assets & our market leadership in logistics & mo
Slide 28: Imperial Holdings – Value Creation
IMPERIAL HOLDINGS – VALUE CREATION Strategic Thrust 1 • Devolve portfolio & competitive strategies to Divisions Strategic Thrust 2 • Ensure Divisions have appropriate management for performance, succession & transformation Strategic Thrust 3 • Embed & devolve Organisation Efficiency processes, pract
Slide 29: Divisional Value Creation
DIVISIONAL VALUE CREATION Increase penetration & performance in the logistics & vehicle supply chains through highly competitive value propositions to selected clients, delivered by two self sufficient divisions Imperial Logistics & MOTUS Imperial Logistics attributes expected to create value: strat
Slide 30: Divisional Structure – Imperial Logistics
DIVISIONAL STRUCTURE – IMPERIAL LOGISTICS Imperial Logistics is focused on expanding & leveraging its footprint in selected African & European countries, with a bias towards less capital intensive businesses that enhance revenue growth & returns. Integrated logistics capabilities are also being stre
Slide 31: Imperial Logistics
IMPERIAL LOGISTICS REVENUE* (Rm) OPERATING PROFIT* (Rm) 67% foreign 63% foreign 4 year 4 year CAGR CAGR =+9% =+11% 1 357 25 259 1 344 1 342 23 892 22 860 1 195 1 188 1 179 21 806 21 558 21 334 20 005 1 062 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 2015 H1 201
Slide 32: Divisional Structure – Motus
DIVISIONAL STRUCTURE – MOTUS The formation and structuring of Motus, under one collaborative leadership team, will enhance returns in the medium term by reducing duplication, complexity, costs & capital employed, unlocking intra-divisional efficiencies & more deeply penetrating the vehicle supply ch
Slide 33: Motus
MOTUS REVENUE* (Rm) OPERATING PROFIT* (Rm) 4 year CAGR 23% foreign 4 year CAGR =+4% =-4% 13% foreign 35 015 34 878 34 105 2 031 33 672 32 741 31 477 30 803 1 747 1 691 1 643 1 568 1 566 1 481 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2
Slide 34: Imperial Holdings – Value Creation
IMPERIAL HOLDINGS – VALUE CREATION Strategic Thrust 1 • Devolve portfolio & competitive strategies to Divisions Strategic Thrust 2 • Ensure Divisions have appropriate management for performance, succession & transformation Strategic Thrust 3 • Embed & devolve Organisation Efficiency processes, pract
Slide 35: Agenda
AGENDA OUR WHAT HAS STRATEGIC GUIDANCE CHANGED? CHALLENGES STRATEGIC CONCLUSION QUESTIONS RESPONSE 35
Slide 36: Leadership Model
LEADERSHIP MODEL Strategy Business Model Structure & Staffing Human Performance Operating Performance Financial Performance 36
Slide 37: Conclusion
CONCLUSION > Imperial’s value traps • Correlation to SA risk factors (currency & low growth) • “Conglomerate” attributes (diverse investments & structural complexity) • Inadequate investor clarity & choice • Benchmarked to SA peers > Step 1 – Reposition IPL as the parent of two strategically focusse
Slide 38: Steve Jobs quote on focus
“People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully.” Steve Jobs 38
Slide 39: Agenda
AGENDA OUR WHAT HAS STRATEGIC GUIDANCE CHANGED? CHALLENGES STRATEGIC CONCLUSION QUESTIONS RESPONSE 39
Slide 40: Thank You
IMPERIAL \\ \ THANKYOU | jt Vea
Slide 41: Disclaimer
DISCLAIMER Certain statements made in this presentation constitute forward-looking statements. Forward-looking statements are typically identified by the use of forward-looking terminology such as ‘believes’, ‘expects’, ‘may’, ‘will’, ‘could’, ‘should’, ‘intends’, ‘estimates’, ‘plans’, ‘assumes’ or
Slide 42: IMPERIAL ¥
IMPERIAL ¥ 42