Imperial Logistics — H1 F2020 Earnings Presentation
67 slides from Imperial Logistics's earnings presentation, 2020
Slide 1: Investment community presentation
Investment community presentation Interim results for the 6 months ended 31 December 2019
Slide 2: Agenda
Agenda Overview Operating context Operations review Financial review Strategy Looking forward 2
Slide 3: Overview
wre Imperial’ beyond possibility Overview
Slide 4: Key features
Key features Continuing revenue Continuing operating profit Operating margin improved +1% +9% 6.4% R25.4 billion R1.6 billion (H1 F2019: 5.9%) Continuing HEPS Continuing EPS Interim cash dividend +10% +12% 167 cps 371 cents per share 372 cents per share 45% of continuing HEPS Free cash conversion of
Slide 5: Overview
Overview • Grew revenue & operating profit from continuing operations, despite increasingly challenging trading conditions impacting volumes • Continuing operating margin improved from 5.9% to 6.4% • Results benefited from: › new contract gains › the benefits of rationalisation & cost-cutting in Sou
Slide 6: Overview
Overview • Our balance sheet management remains sound › sufficient headroom to achieve organic & acquisitive growth (R10.6 billion of unutilised banking facilities) › net working capital improved by 16% compared to December 2018: in line with 4-5% of revenue › net capital expenditure of R815 million
Slide 7: Group revenue & operating profit per capability
Group revenue & operating profit per capability Revenue Operating profit Operating margin R million R million % 1 635 25 488 25 434 1 499 6.4 23 576 1 442 6.1 5.9 284 233 3,3 3,9 300 6 839 7 363 4,4 6 992 7,1 6,0 7,3 798 898 13 266 12 380 859 12 014 4 570 5 383 5 691 350 401 453 7,7 7,4 8,0 Dec 17 D
Slide 8: Operating context
Imperial’ beyond possibility Operating context
Slide 9: Operating context
Operating context • Most of our businesses were exposed to heightened difficult economic & trading conditions across all markets • Minimal recovery expected in the short term • Benefits of significant rationalisation & cost cutting in F2019 & new contract gains assisted in mitigating this impact Sou
Slide 10: Operating context
Operating context Rest of Africa (25% group revenue; 31% group operating profit) • Mixed trading conditions across the continent • In healthcare, businesses in West Africa delivered an excellent performance • Strong volumes from our medical supplies & kitting business (Imres) - record order book • G
Slide 11: Operations review
Imperial’ beyond possibility Operations review
Slide 12: Divisional overview
Divisional overview South Africa African Regions International • Leading end-to-end capabilities provide outsourced • Leading distributor of pharmaceuticals & consumer • Transportation management (shipping/road) services to extensive client base across industries goods in Southern, East & West Afric
Slide 13: Revenue by key industry & capabilities
Revenue by key industry & capabilities Revenue by industry (%) Revenue by capability (%) South Africa African Regions International South Africa African Regions International 9% 4% 8% 3% 6% 8% 36% 34% 15% 42% 25% 40% 44% 56% 57% 66% 30% 31% 86% Consumer Industrial Chemicals & Energy Market access He
Slide 14: Growth trend: South Africa excluding CPG
Growth trend: South Africa excluding CPG Revenue Operating profit 4 year +13% 2 year +8% R million R million CAGR= CAGR= +5% +5% 579 7 640 529 534 6 457 6 599 6 737 6 336 223 173 208 1 918 2 280 3 072 2 710 2 634 358 345 409 4 100 3 478 3 699 4 190 4 355 318 269 266 267 213 (2) (19) (53) Dec 15 Dec
Slide 15: Growth trend: African Regions
Growth trend: African Regions Revenue Operating profit 4 year 0% 2 year +7% R million R million CAGR= CAGR= +6% +12% 6 339 6 359 511 345 479 5 385 583 29 23 4 995 536 408 640 14 30 4 568 418 472 663 42 658 535 571 352 420 506 3 865 3 462 4 304 5 116 5 478 (18) Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec
Slide 16: Growth trend: International (Euro)
Growth trend: International (Euro) Revenue Operating profit Operating margins 4 year 2 year € million € million % CAGR= CAGR= +6% -8% +3% +13% 4.8% 747 735 760 4.4% 702 34 3.9% 32 2,0% 30 1,2% 548 256 250 241 3 5 242 4 1,7% 213 491 485 519 460 335 29 26 29 6,0% 5,0% 6,3% Dec 15 Dec 16 Dec 17 Dec 18
Slide 17: Growth trend: International (Rands)
Growth trend: International (Rands) Revenue Operating profit 4 year 2 year R million R million CAGR= -8% CAGR= +12% +9% +4% 12 412 11 410 11 592 11 435 545 505 486 79 46 8 241 3 976 63 3 906 3 940 3 946 3 202 5 039 7 504 7 652 8 436 7 489 459 423 466 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 17 Dec 18
Slide 18: Divisional statistics
Divisional statistics Operating margin Return on invested capital Weighted average cost of capital % % % 7,9% 8,0% 7,6% 7,6% 13,4% 13,2% 15,9% 16,4% 6,4% 5,9% 10,1% 11,8% 4,8% 11,2% 8,9% 10,0% 10,5% 8,0% 8,3% 3,9% 8,9% 6,5% 7,4% 5,6% South Africa African Regions International Group South Africa Afri
Slide 19: Financial review
a = " - a Sri Te — Imperial’ beyond possibility Financial review
Slide 20: IFRS 16 lease adoption
IFRS 16 lease adoption Financial position Profit or loss 2 955 936 1 636 6 001 5 433 4 881 138 1 143 13 5 836 6 411 5 283 (403) (410) 2 019 1 498 1 130 (402) 1 July 2018 31 December 2019 30 June 2019 EBITDA Operating profit PBT Liabilities Equity Assets IAS 17 IFRS 16 Balance sheet impact Profit or
Slide 21: The impact of IFRS 16 lease adoption on financial reporting
The impact of IFRS 16 lease adoption on financial reporting Key metrics Before IFRS 16 Impact After IFRS 16 Profit or loss EBITDA (Rm) 2 019 936 2 955 Operating profit (Rm) 1 498 138 1 636 Operating margin (%) 5.9 0.5 6.4 Interest cost 213 125 338 Interest cover 8.5 (0.3) 8.2 Balance sheet Net debt
Slide 22: Profit & Loss (continuing operations)
Profit & Loss (continuing operations) Dec 2019 Dec 2018* Rm Rm % Change Revenue 25 397 25 221 Operating profit (note 1) 1 636 1 500 9 Amortisation of intangible assets arising on business combinations (174) (196) (11) Profit on disposal of properties, net of impairments 15 4 >100 Impairments of good
Slide 23: Profit & Loss (continuing operations)
Profit & Loss (continuing operations) Dec 2019 Dec 2018* Rm Rm % Change Profit before financing costs & associates 1 473 1 277 15 Net financing costs (note 1) (338) (298) 13 Income from associates (note 2) 8 32 (75) Tax (note 3) (360) (297) 21 Net profit for the year - continuing operations 783 714
Slide 24: Financial position
Financial position Dec 2019 Jun 2019* Rm Rm % Change Property, plant & equipment 2 630 2 647 Transport fleet (note 1) 5 787 5 452 6 Right-of-use assets 4 714 4 780 (1) Goodwill & intangible assets 6 743 6 719 Investments in associates, other investments & other financial assets (note 2) 695 745 (7)
Slide 25: Financial position
Financial position Dec 2019 Jun 2019* Rm Rm % Change Net interest bearing borrowings excluding lease liability (note 1) (7 401) (5 745) 29 Lease obligations (note 2) (5 159) (5 969) (14) Other liabilities (2 431) (2 418) Total equity (note 3) 8 237 8 245 1. Increased, impacted mainly by: › cash infl
Slide 26: Cash flow operating activities (total Logistics, excluding Motus)
Cash flow operating activities (total Logistics, excluding Motus) Dec 2019 Dec 2018 Rm Rm Cash generated by operations (before interest & taxes paid) (note 1) 2 682 2 986 Net working capital movements (excludes currency movements & net acquisitions) (note 2) (1 094) (577) Net Interest & tax paid (68
Slide 27: Cash flow summary (total Logistics, excluding Motus)
Cash flow summary (total Logistics, excluding Motus) Dec 2019 Dec 2018 Rm Rm Cash flow from operating activities 905 1 603 Investing activities: (837) (556) Capital expenditure (1) (815) (700) Net (acquisitions) disposals of subsidiaries & businesses (2) (75) Net movement in associates, investments,
Slide 28: Leverage
Leverage Net debt to EBITDA excluding IFRS 16 2,6 2.0 • The Group’s liquidity remains strong 1,5 1.5 1,6 • R10.6 billion of unutilised banking facilities 15 563 12 634 12 560 • 73% of the Group debt is long-term in nature 11 571 11 714 9 971 • 49% of the debt is at fixed rates 6 209 5 721 5 745 7 40
Slide 29: Performance against medium term guidance
Performance against medium term guidance H1 F2020 Medium term guidance over 3 years 1% revenue growth ILSA & ILI¹: 2x GDP growth + inflation Revenue & operating profit 9% operating profit growth ILAR¹: Low double digit growth Cash conversion 72% Targeted cash conversion of 70-75% Debt capacity ZAR3-
Slide 30: Strategy
Imperial’ beyond possibility Strategy
Slide 31: Strategic positioning - recap
Strategic positioning - recap Our strategic focus & value proposition is to position Imperial as the ‘Gateway to Africa’ through: • Offering clients an integrated logistics & market access service offering into & out of Africa • Focusing our service offering & positioning on three capabilities: mark
Slide 32: Africa's significant consumer market potential
Africa’s significant consumer market potential ALGERIA 42 Mn EGYPT 2017 2050 99 Mn SIMILAR IN SIZE TO GERMANY USD USD Collective GDP 2.75 (2x) 5.5 8 3 trillion trillion SUDAN 42 Mn 1.25 2.4 10 Population ETHIOPIA billion (2x) billion 1 108 Mn 2 SIMILAR IN SIZE TO VIETNAM NIGERIA Urban UGANDA 196 Mn
Slide 33: Global pharma market expected to reach US$1.44 tn
By 2022, the Global pharma market is expected to reach US$1.44 tn, with Africa driving a $25.5 bn opportunity 2017-2022: Global Markets Dynamics Central & Eastern Europe (CEE)2 Size: US$ 23.9 bn CAGR ‘17-22: 4.1% Europe China Size: US$ 235.6 bn Size: US$ 131.9 bn CAGR 2017-22: 3.1% CAGR 2017-22: 5.5
Slide 34: Africa footprint
Africa footprint Netherlands UK Belgium Germany Poland Czech Republic France Switzerland Italy Bulgaria Spain Turkey Syria China Iraq Iran Morocco Jordan Pakistan Algeria Libya Egypt Western Sahara Saudi Arabia UAE Oman India Mauritania Mali Niger Yemen Senekal Chad Sudan Burkina Guinea Faso Benin N
Slide 35: Short term strategic initiatives
Short term strategic initiatives This growth-led strategic focus is supported by the following short term, core strategic initiatives: • Growing in Africa › building on existing & expanding into new capabilities › investing in existing & new geographies that complement our capabilities, industries &
Slide 36: Progress against strategy
Progress against strategy Growing in Africa • Four new acquisitions were successfully concluded (mainly in healthcare & consumer) of R584 million spent in total • Simplified Solutions in Healthcare (SSiH) model gaining traction • Demand generation, light contract manufacturing & brand partnership se
Slide 37: Progress against strategy
Progress against strategy Strategically aligning our International portfolio with our core competitive advantage - Africa • Progressing the disposal of our international shipping business › the market will be kept informed of material developments - targeting to close by 30 June 2020, subject to reg
Slide 38: Environmental, Social & Governance (ESG)
Environmental, Social & Governance (ESG)
Slide 39: The critical importance of ESG
The critical importance of ESG • ESG - including climate change & waste management - is high on our agenda, with a number of key initiatives undertaken & in progress • Our approach to ESG management includes: › robust governance systems, risk management & controls › investing in our employees & cult
Slide 40: Social impact
Social impact Our strategic CSI projects continue to be rolled out across regions, with visible & sustainable positive impact on our communities • Unjani Clinics › currently 72 clinics in the network with a vision to increase the footprint to 100 clinics by the end of calendar 2020 › created permane
Slide 41: Social impact
Social impact • World class eye hospital in Abuja, Nigeria › a partnership with the Tulsi Chanrai Foundation › served over 35 000 patients & performed over 700 highly subsidised eye surgeries since inception › treated over 20 000 outpatients › conducted 96 rural eye camps & screened c.14 000 patient
Slide 42: Looking forward
Imperial’ beyond possibility Looking forward
Slide 43: Looking forward
Looking forward Based on the first six months of trading - & particularly the increasingly challenging & volatile economic & market conditions in which we operate - our outlook for the financial year to 30 June 2020 is as follows: We expect Imperial’s continuing operations to deliver: • Single digit
Slide 44: Thank you
THANK YOU
Slide 45: Annexure A
Annexure A Secondary segmental disclosure & IFRS 16 Lease adoption
Slide 46: Simplifying disclosure
Simplifying disclosure Secondary segmental disclosure provided for the H1 F2020 results is categorised according to our capabilities below: 1. Freight management (c.49% group revenue; 55% group operating profit) › moves the products of our clients cost-effectively › using road, rail, air & ocean tra
Slide 47: Secondary segmental disclosure: capabilities per region
Secondary segmental disclosure: capabilities per region PROFIT or LOSS Freight Management Contract Logistics Market Access Head Office & Eliminations Total Logistics Rm H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 Revenue 12 380 13 266 7 363 6 839 5 691 5 383 (37)
Slide 48: IFRS 16 lease adoption
IFRS 16 lease adoption Number of leases by segment Leases by asset value (Rm) 472 80 1 484 1 503 1 785 Properties 3 795 South Africa Transport fleet African Regions Plant & equipment 105 International Motor vehicles Effective date & approach Key principles • Effective 1 July 2019 • At inception, rec
Slide 49: IFRS 16 impact on H1 F2020 continuing operations
IFRS 16 impact on H1 F2020 continuing operations Profit or loss (Rm) Total operations South Africa African Regions International EBITDA 936 242 64 630 Depreciation (798) (200) (48) (550) Operating profit 138 42 16 80 Interest (125) (53) (17) (55) Profit before tax, exceptional items & foreign exchan
Slide 50: Annexure B
Annexure B Key industry verticals: trends & context
Slide 51: Healthcare context
Healthcare context • Healthcare business achieved double digit revenue growth • Maintained or grew market share & secured new business • East & West Africa grew revenue despite highly competitive & challenging markets • Greater demand for quality healthcare supported by: › rising consumerism & gover
Slide 52: Healthcare growth opportunities
Healthcare growth opportunities • We will pursue the growth opportunities arising from: › global serialisation regulations › variability in requirements between countries & pro-national regulations › emerging issue of substandard health products • Exploit synergies between our consumer & healthcare
Slide 53: Consumer
Consumer Context • Significant new business secured despite difficult trading conditions & depressed volumes • Exited the multi-principal distribution model in CPG in South Africa • Redirected focus on the dedicated contracts component of the consumer business • Retained c.80% of the CPG ambient con
Slide 54: Automotive
Automotive Context • Despite declining volumes, new business won • Successful implementations undertaken for both longstanding & new clients › working jointly to determine future opportunities within new regions of operation • Key disruptors in this sector include: › electrification › ongoing, sever
Slide 55: Chemicals & energy
Chemicals & energy Context • An industry with diverse economic cycles • Our scale, reach, expertise & technology serve as a buffer against volume declines • Our performance remains resilient - revenue generated mainly under long-term contracts • We realised new business gains • A significant player
Slide 56: Industrial & mining
Industrial & mining Context • Despite volume declines, new business won • Proven ability to provide clients with integrated, end-to-end solutions - a competitive advantage • Continue to drive cross selling & increase our share of wallet within our existing client base • Mining solutions are focused
Slide 57: Industrial & mining
Industrial & mining Growth opportunities • National & multinational companies prefer to partner with large, multimodal service providers to manage multifaceted supply chains › include vendors, labour, manufacturers, assets, technologies, data • Further invest in strategic account management teams &
Slide 58: Annexure C
Annexure C End-to-end value chain & positioning in Africa
Slide 59: End-to-end value chain
End-to-end value chain Retail services demand 6a generation Air & ocean 7a Consumer Raw materials 1a Exports 5a Formal retail Air & ocean; sourcing & procurement 4 2 Manufacturing 3a Warehousing Distributors Informal retail 5b Air & ocean; sourcing & procurement 6b Retail services demand Packaging 1
Slide 60: Key drivers of consumer demand in Africa
Key drivers of consumer demand in Africa 1. 2. 3. 4. 5. 6. Urbanisation Population & Growth of middle & ICTs & formal E-commerce Brand recognition Demographics upper classes markets & importance • Urbanisation will bring • Africa’s young • In the next few years, • Two out of three • The digital age
Slide 61: Leading healthcare distributor in West, East & Southern Africa
Leading healthcare distributor in West, East & Southern Africa Employees & locations Tailored solutions Over 1 900 Based in 9 countries Customised market access solutions Fully compliant employees suited to the clients needs facilities Operations Owned & outsourced Over 100 000m² warehouse 43 millio
Slide 62: Unmatched access to formal & informal consumer markets
Unmatched access to formal & informal consumer markets Employees & locations Tailored solutions Over 2 600 Based in 8 countries Customised market access solutions Value added solutions employees across Africa suited to the clients needs across markets Operations Owned & outsourced Over 110 000m² In
Slide 63: Annexure D
Annexure D Environmental, Social & Governance (ESG) progress
Slide 64: Progress & milestones: Environmental (E)
Progress & milestones: Environmental (E) • Reported on Carbon & Emissions as per latest GHG Protocol (2014) since 2007 • Active participants on the JSE SRI Index since its inception in 2004 › founded on the principle of the triple bottom line - environmental, social & economic sustainability › ensur
Slide 65: Progress & milestones: Social (S)
Progress & milestones: Social (S) • Identified healthcare, education & skills development as strategic imperatives • Established a sub-committee that oversees CSI, ESG & Enterprise Development • Subscribe to principles of the UN Global Compact to best align strategies & operations with universal pri
Slide 66: Progress & milestones: Governance (G)
Progress & milestones: Governance (G) • Have a formalised Code of Ethics • Conform to the requirements of FTSE4GOOD socially responsible Investment Index • Abide by the 10 Principles as set out in the United Nations Global Compact Principles • Conform to the OECD recommendations regarding corruption
Slide 67: 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