Imperial Logistics — Imperial Holdings — H1 2018 Earnings Presentation
54 slides from Imperial Logistics's earnings presentation, Feb 20, 2018
Slide 1: Investment Community Presentation: Results for the six months ended 31 December 2017
INVESTMENT COMMUNITY PRESENTATION LEADERS IN Results for the six months ended 31 December 2017 MOBILITY 20 February 2018
Slide 2: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 2
Slide 3: Group Overview
GROUP OVERVIEW GROUP REVENUE OPERATING PROFIT HEPS 11% 5% 16% R66 520 million R3 093 million 717 cents PER SHARE EPS NET DEBT : EQUITY RATIO INTERIM DIVIDEND 9% 80% 323 cents 671 cents (INCL PREF SHARES AS EQUITY) (45% of HEPS) PER SHARE 71% INCL. SCHIRM PROCEEDS ROIC OF 12.2% VS WACC OF 9.2
Slide 4: Overview
OVERVIEW > All key financial metrics improved in mixed trading conditions > Record H1 revenue & increase in operating profit: higher vehicle sales in Motus, acquisitions & good performance from Imperial Logistics, mainly SA > Foreign revenue & operating profit increased by 20% & 4% respectively > Si
Slide 5: Growth Trend in Foreign Operations
GROWTH TREND IN FOREIGN OPERATIONS REVENUE (Rm) OPERATING PROFIT (Rm) 3 year 3 year 30 684 CAGR= CAGR= 15% 11% 1 211 1 205 25 628 25 271 24 457 24 239 1 077 1 060 1 035 958 20 187 20 165 794 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 20
Slide 6: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 6
Slide 7: Operating Context – Imperial Regions: South Africa and African Regions
OPERATING CONTEXT – IMPERIAL REGIONS South Africa (54% revenue; 65% operating profit) > High unemployment, struggling State Owned Enterprises (SOE’s) & pressure on government finances continue to erode consumer & business confidence > New political leadership: less corrupt, more accountable governme
Slide 8: Operating Context – Imperial Regions: Eurozone, UK & Australia
OPERATING CONTEXT – IMPERIAL REGIONS Eurozone, UK & Australia (37% revenue; 20% operating profit) > Economic conditions in Europe buoyant > Economic growth & the passenger vehicle market in the United Kingdom depressed by Brexit uncertainties > The Australian vehicle market growing steadily but marg
Slide 9: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 9
Slide 10: Strategic Update
STRATEGIC UPDATE The transformation & development of Imperial has been directed at value creation through strategic clarity (portfolio rationalisation), managerial focus (organisation structure) and shareholder insight (disclosure). Progress has exceeded expectations > Divisions managed & reported o
Slide 11: Capital Allocation Objective 1
CAPITAL ALLOCATION OBJECTIVE 1 We will release capital & sharpen executive focus, by disposing of non-core, strategically misaligned, underperforming or low return on effort assets > Non-strategic properties for proceeds of R606m > Laabs GmbH in Europe for €2m (R32m) in October 2017 > Interests in s
Slide 12: Capital Allocation Objective 1 (cont.)
CAPITAL ALLOCATION OBJECTIVE 1 (CONT.) Disposals in progress: > Non-strategic properties: 27 properties with a carrying value of R543m are held for sale > Transport Holdings in Botswana for R200m, subject to funding approval > Disposal of 30% of Imperial Logistics South Africa to a BBBEE partner pro
Slide 13: Capital Allocation Objective 2
CAPITAL ALLOCATION OBJECTIVE 2 We will invest capital in South Africa to maintain the quality of our assets & our market leadership in logistics & motor vehicles H1 2018 Capex: > R1.3bn invested, mainly in vehicles for hire 13
Slide 14: Capital Allocation Objective 3
CAPITAL ALLOCATION OBJECTIVE 3 We will invest capital in Africa (ex RSA) primarily to achieve our 2020 objective for the revenue & profits generated by Logistics African Regions to equal those of Logistics RSA > 70% of Surgipharm Limited for USD35m (ZAR490m), effective 1 July 2017 • strategically al
Slide 15: Capital Allocation Objective 4
CAPITAL ALLOCATION OBJECTIVE 4 We will invest capital generated from operations & divestments to grow our businesses beyond the continent, with an emphasis on logistics > Pentagon Motor Holdings (21 prime UK retail dealerships) for £28m (R479m) effective 1 September 2017 • supports Motus’ strategy t
Slide 16: Capital Allocation Objective 5
CAPITAL ALLOCATION OBJECTIVE 5 The development & sustainability of Imperial will be underpinned by investment in human capital & information systems H1 2018 Capex on HC & IS > R235m Human Capital > Enterprise Architecture project completed & implementation of recommendations in progress > Continuous
Slide 17: Capital Allocation Objective 5 (cont.)
CAPITAL ALLOCATION OBJECTIVE 5 (CONT.) Information Systems > Major systems implementations during H1 2018: • Logistics South Africa & African Regions – SAP, Soloplan, IFM, MDS (CRM) • Logistics International – SAP, Soloplan, Next Generation Infrastructure & developing global template-based industry
Slide 18: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 18
Slide 19: Imperial's Divisions
IMPERIAL’S DIVISIONS IMPERIAL LOGISTICS MOTUS REVENUE OPERATING PROFIT REVENUE OPERATING PROFIT 5% 7% 16% 5% R27.0 billion R1.4 billion R39.7 billion R1.7 billion 41% contribution* 45% contribution* 59% contribution* 55% contribution* 3 YEAR CAGR 6% 3 YEAR CAGR 5% 3 YEAR CAGR 6% 3 YEAR CAGR
Slide 20: Divisional Overview – Imperial Logistics
DIVISIONAL OVERVIEW – IMPERIAL LOGISTICS A mainly African & European provider of integrated outsourced value-add logistics, supply chain & route-to-market solutions, customised to ensure the relevance & competitiveness of its clients. With established capabilities in transportation, warehousing, dis
Slide 21: Imperial's Divisions: Logistics
IMPERIAL’S DIVISIONS Business aspirations Performance > Grow revenue through focused > Growth in revenue & operating profit, supported by: organic growth & strategic • good performance from Logistics South Africa; acquisitions in specific industry • solid performance from Ecohealth in Nigeria & CIC
Slide 22: Growth Trend Logistics South Africa
GROWTH TREND LOGISTICS SOUTH AFRICA REVENUE (Rm) OPERATING PROFIT (Rm) +2% +13% 3 year 3 year CAGR CAGR +2% +1% 8 510 522 8 335 511 8 163 8 073 7 733 7 533 461 458 7 299 441 410 340 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 > Good
Slide 23: Growth Trend Logistics African Regions
GROWTH TREND LOGISTICS AFRICAN REGIONS REVENUE (Rm) OPERATING PROFIT (Rm) +4% 4% 3 year 3 year CAGR CAGR +2% +12% 408 392 392 388 5 981 5 872 348 5 551 344 5 359 5 192 4 782 291 4 588 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 > Re
Slide 24: Growth Trend Logistics International
GROWTH TREND LOGISTICS INTERNATIONAL REVENUE (Rm) OPERATING PROFIT (Rm) +7% +3% 3 year 3 year CAGR CAGR 658 +11% +6% 616 572 12 972 12 168 12 052 461 10 487 10 306 447 9 595 9 477 397 386 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018
Slide 25: Logistics International (Euro)
LOGISTICS INTERNATIONAL (EURO) REVENUE (€m) OPERATING PROFIT (€m) OPERATING MARGINS (%) +3% -2% 3,7% 29,3 28,8 3,5% 821 795 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 > Revenue in Euros, excluding businesses held for sale (Schirm), increased by 3% & 4% respectively > The performance in Rand ter
Slide 26: Imperial Logistics (Total)
IMPERIAL LOGISTICS (TOTAL) REVENUE* (Rm) OPERATING PROFIT* (Rm) 69% foreign 3 year 3 year 62% foreign CAGR CAGR +6% +5% 27 033 25 862 1 464 24 803 1 391 24 020 23 892 1 357 1 344 22 860 1 300 21 558 1 199 1 188 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H1 2015 H2 2015 H1 2016 H2 2016 H
Slide 27: Divisional Overview – Motus
DIVISIONAL OVERVIEW – MOTUS Southern Africa’s largest vehicle group, operating across the motor value chain, importing, distributing, retailing & renting vehicles, & distributing & retailing aftermarket parts, supported & augmented by motor related financial services MOTUS VEHICLE IMPORT & DISTRIBUT
Slide 28: Imperial's Divisions: Motus
IMPERIAL’S DIVISIONS Business aspirations Performance > To secure growth & returns through deep direct > All four sub-divisions recorded revenue & operating relationships with leading OEMs, optimal profit growth distribution techniques, creative marketing, new > Results were supported by: dealership
Slide 29: National Vehicle Sales 2009 – 2017
NATIONAL VEHICLE SALES 2009 – 2017 IMPERIAL’S SHARE OF TOTAL NAAMSA VEHICLE SALES & GDP GROWTH 800 9% 644 631 639 599 588 600 29 31 31 544 6% 530 27 30 495 481 491 15 Vehicle units (thousands) 437 441 24 454 446 409 424 400 26 20 3% 312 341 GDP growth (%) 200 0% 99 97 117 120 119 117 112 105 0 80 (3
Slide 30: Imperial's Market Share vs OEMs
IMPERIAL’S MARKET SHARE VS OEMS MARKET SHARE* (%) 22,8% 22,1% 15,6% 15,3% 15,0% 14,6% 13,6% 12,9% 9,9% 7,8% 5,2% 4,4% Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Dec 16 Dec 17 Imperial Mercedes Ford Toyota Volkswagen Nissan Motus > Imperial’s total market share in South Afr
Slide 31: Divisional Review: Vehicle Import & Distribution
DIVISIONAL REVIEW > Revenue & operating profit increased mainly due to: VEHICLE IMPORT & DISTRIBUTION • 10% increase in new vehicle sales (Hyundai up 5%, Kia up 27% & Renault up 38%); & • vehicle mix aligned to market demand > Importer market share increased to 15% from 14% in the prior period > Hyu
Slide 32: South African New Vehicle Prices
SOUTH AFRICAN NEW VEHICLE PRICES SELLING PRICE VS CURRENCY COST OF IMPORTED PRODUCT (%) 130 125 120 115 Based to 100 110 105 100 95 90 Dec Dec Dec Mar Mar Mar Mar Dec Jun Jun Jun Jun Sep Sep Sep Sep 2014 2015 2016 2017 Euro based cost (ind. Mar14) Dollar based cost (ind. Mar14) Selling price > 48% i
Slide 33: Divisional Review: Vehicle Retail & Rental
DIVISIONAL REVIEW > Revenue & operating profit increased, due to: VEHICLE RETAIL & RENTAL • increase in unit volumes in dealerships of importer brands in SA resulting from higher sales of smaller lower margin entry level vehicles & smaller SUVs; • good performance from parts & aftersales segments; •
Slide 34: Divisional Review: Aftermarket Parts
DIVISIONAL REVIEW > Grew revenue & operating profit enhanced by: AFTERMARKET PARTS • increased sales volumes in Beekmans & Alert Engine Parts; & • tighter cost controls > Midas’ (AAAS) performance was flat, depressed by market contraction, increased pricing pressure & consumers trading down > ROIC d
Slide 35: Divisional Review: Motor Related Financial Services
DIVISIONAL REVIEW > Revenue & operating profit increased due to: MOTOR RELATED FINANCIAL SERVICES • higher profitability in demo vehicle sales & maintenance funds; & • strong growth in the loan book & returns from alliances with financial institutions > Margins were negatively impacted by increased
Slide 36: Motus (Total)
MOTUS (TOTAL) REVENUE* (Rm) OPERATING PROFIT* (Rm) 3 year 31% foreign CAGR 3 year =+6% CAGR 13% foreign =+3% 39 678 34 564 34 095 33 914 33 672 32 741 32 455 1 759 1 716 1 691 1 668 1 643 1 642 1 566 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2
Slide 37: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 37
Slide 38: Income Statement H1 2018
INCOME STATEMENT H1 2017 H1 2018 Rm Rm % CHANGE Revenue 59 727 66 520 11 LOGISTICS 5% good performance from South Africa, the acquisition of Surgipharm & solid performances REVENUE from Ecohealth , the International Shipping & CONTRIBUTION PER Automotive segments, assisted by the average DIVISION
Slide 39: Income Statement H1 2018
INCOME STATEMENT H1 2017 H1 2018 Rm Rm % CHANGE Revenue 59 727 66 520 11 Operating profit 2 955 3 093 5 Operating profit margin 4.9% 4.6% LOGISTICS 7% OPERATING PROFIT solid performances from the South African CONTRIBUTION PER business, Ecohealth, International Shipping & DIVISION Automotive segme
Slide 40: Divisional Statistics
DIVISIONAL STATISTICS OPERATING MARGIN (%) 5,0% 5,1% 4,8% 4,3% 4,9% 4,6% Logistics Motus Group H1 2017 H1 2018 RETURN ON INVESTED CAPITAL* (%) 11,4% 11,7% 12,5% 12,0% 12,0% 12,2% Logistics Motus Group H1 2017 H1 2018 WEIGHTED AVERAGE COST OF CAPITAL* (%) 10,4% 10,4% 8,4% 8,2% 9,3% 9,2% Logistics Mot
Slide 41: Income Statement
INCOME STATEMENT Dec 2016 Dec 2017 Rm Rm % CHANGE Revenue 59 727 66 520 11 Operating profit 2 955 3 093 5 Amortisation of intangible assets (263) (226) Impairments of goodwill and other assets (114) Profit (loss) on sale of businesses (46) (18) Foreign exchange gains (loss) (121) (84) Re-measurement
Slide 42: Income Statement
INCOME STATEMENT Dec 2016 Dec 2017 Rm Rm % CHANGE Profit before financing costs 2 498 2 654 Net financing costs (828) (753) (9) Income from associates 49 41 (16) Profit before tax 1 719 1 942 13 Tax (498) (575) Net profit for the year 1 221 1 367 12 Attributable to minorities (21) (61) Attributable
Slide 43: Financial Position
FINANCIAL POSITION Dec 2016 June 2017 Dec 2017 % CHANGE Rm Rm Rm on June 2017 Property, plant & equipment 10 134 10 371 9 667 (7) Transport fleet 5 887 5 560 5 345 Vehicles for hire 4 320 3 963 4 489 13 Goodwill & intangible assets 9 764 9 529 9 172 (4) Associates, investments & other financial asse
Slide 44: Financial Position
FINANCIAL POSITION Dec 2016 June 2017 Dec 2017 % CHANGE Rm Rm Rm on June 2017 Total shareholders’ interest 19 275 20 261 20 453 Net interest bearing borrowings (ignoring Regent cash) 20 672 14 647 16 808 15 Other liabilities 8 866 8 096 7 328 Liabilities directly associated with assets classified as
Slide 45: Cash Flow – Operating Activities
CASH FLOW – OPERATING ACTIVITIES Dec 2016 Dec 2017 Rm Rm Cash generated by operations 4 330 4 231 Net working capital movements (2 379) (208) (excludes currency movements & net acquisitions) Interest & tax paid (1 483) (1 320) Cash flow from operating activities before rental assets capex 468 2 703
Slide 46: Cash Flow Summary
CASH FLOW SUMMARY Dec 2016 Dec 2017 Rm Rm Cash flow from operating activities (931) 1 542 Investing activities: Net disposals / (acquisitions) of subsidiaries & businesses (1 671) (1 042) Capital expenditure – non-rental assets (1 017) (265) Net movement in associates & JVs 542 (204) Net movement in
Slide 47: Gearing
GEARING Net debt to equity > Net debt to equity reduced from 98% to 80%, supported by: 98% • cash proceeds from the sale of non-strategic properties & businesses; 79% 76% • an improvement in working capital; 73% 71% 71% 66% • a reduction in capital expenditure; 62% 60% • partially offset by the acqu
Slide 48: Returns
RETURNS ROE (%) ROIC vs WACC (%) 14,7 18,7 16,8 13,1 15,6 12,4 12,2 12,0 12,5 12,1 9,4 9,3 9,2 9,0 9,0 F 2014 F 2015 F 2016 H1 2017 H1 2018 F 2014 F 2015 F2016 H1 2017 H1 2018 ROIC WACC ROIC improved due to: > Decrease in net debt > Higher returns Note: ROE, ROIC & WACC are calculated on a rolling 1
Slide 49: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 49
Slide 50: Prospects for 2018
PROSPECTS FOR 2018 Our near term expectations for Imperial are unchanged. We anticipate solid operating & financial results in F2018, subject to stable currencies in the economies in which we operate, & South Africa retaining its investment grade In the six months to June 2018 for continuing operati
Slide 51: Thank You
THANK YOU LEADERS IN MOBILITY
Slide 52: Annexures
ANNEXURES LEADERS IN MOBILITY
Slide 53: Our African Footprint
OUR AFRICAN FOOTPRINT Pharma & healthcare logistics and supply chain management Pharma distributors (full RTM solution, including sales function) Pharma and medical supplies (wholesaling) (project work across multiple territories) Managed Solutions in East and West Africa, SA and SADC Logistics & su
Slide 54: 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