Imperial Logistics — Imperial Holdings — FY2018 Earnings Presentation
58 slides from Imperial Logistics's earnings presentation, September 2018
Slide 1: Investment Community Presentation: Results for the 12 months ended 30 June 2018
INVESTMENT COMMUNITY PRESENTATION Results for the 12 months ended 30 June 2018
Slide 2: Agenda
Agenda OVERVIEW CONTEXT OPERATIONS FINANCIAL PATH TO LOOKING REVIEW REVIEW SEPARATION FORWARD 2
Slide 3: Agenda
Agenda OVERVIEW CONTEXT OPERATIONS FINANCIAL PATH TO LOOKING REVIEW REVIEW SEPARATION FORWARD 3
Slide 4: Overview
Overview › Solid results & improvement in all key financial metrics › Good performance from Motus, enhanced by a gain in market share in South Africa & acquisitions › Imperial Logistics performed satisfactorily in mixed trading conditions › Free cash flow up 17% to R5.0 billion › Significant progres
Slide 5: Group highlights
Group highlights RECORD GROUP REVENUE OPERATING PROFIT HEPS* 11% 6% 27% R128 683 million R6 406 million 1 570 cents per share EPS* NET DEBT : EQUITY RATIO FINAL DIVIDEND 38% Improved significantly to 50% 17% to 387 cps 1 681 cents (incl pref shares as debt) 2017: 74% H1 2018: 84%) (45% of
Slide 6: Growth trend in operations outside South Africa
Growth trend in operations outside South Africa REVENUE OPERATING PROFIT 58 950 2 385 Rm Rm 4 year 4 year 2 169 2 240 CAGR= 49 728 48 917 CAGR= 14% 13% 1 854 40 352 34 471 1 493 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 › Foreign revenue up 21% to R59.0 billion (45% of gr
Slide 7: Agenda
Agenda OVERVIEW CONTEXT OPERATIONS FINANCIAL PATH TO LOOKING REVIEW REVIEW SEPARATION FORWARD 7
Slide 8: Operating context – Imperial regions
Operating context – Imperial regions South Africa (55% revenue; 63% operating profit) › Despite improved sentiment the economy contracted sharply in H2 F2018 › Consumer affordability remains under pressure despite some monetary easing › Depressed volumes & competitive pressures in logistics › Highly
Slide 9: Operating context – Imperial regions
Operating context – Imperial regions Eurozone, UK & Australia (36% revenue; 24% operating profit) › Economic conditions in Europe were positive • the continuing economic expansion in Europe has resulted in unemployment improving • certain sectors in which we operate remain under pressure, e.g. steel
Slide 10: Agenda
Agenda OVERVIEW CONTEXT OPERATIONS FINANCIAL PATH TO LOOKING REVIEW REVIEW SEPARATION FORWARD 10
Slide 11: Imperial’s divisions
Imperial’s divisions IMPERIAL LOGISTICS MOTUS Revenue Operating profit Revenue Operating profit 3% 3% 17% 9% R51.4 billion R2.9 billion R77.7 billion R3.6 billion 40% contribution* 44% contribution* 60% contribution* 56% contribution* 4 YEAR CAGR 6% 4 YEAR CAGR 6% 4 YEAR CAGR 6% 4 YEAR CAGR
Slide 12: Imperial’s divisions: Imperial Logistics performance
Imperial’s divisions Performance Acquisitions › Growth in revenue & operating profit, supported by: › 70% of Surgipharm in Kenya for • solid performances from Eco Health in Nigeria & CIC USD35 million (R485 million), effective in Mozambique; 1 July 2017 • acquisition of Surgipharm; • performed sligh
Slide 13: Divisional overview – Imperial Logistics
Divisional overview – Imperial Logistics Imperial Logistics is an integrated outsourced logistics service provider with a diversified presence across Africa & Europe. With its strong regional growth platforms, specialist capabilities customised to serve multi-national clients in attractive industry
Slide 14: Imperial Logistics (total)
Imperial Logistics (total) REVENUE OPERATING PROFIT Rm Rm 4 year CAGR= 68% foreign 4 year CAGR= 67% foreign +6% +6% 2 853 49 715 51 399 2 764 47 912 2 545 2 543 44 418 2 241 41 339 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 › Solid revenue & operating profit growth trends
Slide 15: Imperial’s divisions: Motus performance
Imperial’s divisions Performance Acquisitions › All four sub-divisions recorded revenue & operating › Pentagon Motor Holdings for profit growth £26 million (R479 million), effective › Results were supported by: 1 September 2017 • strong improvement in SA entry level & smaller • operates 38 passenger
Slide 16: 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 17: Motus (total)
Motus (total) REVENUE OPERATING PROFIT Rm Rm 4 year 4 year CAGR= +6% 31% foreign CAGR= 0% 14% foreign 77 659 68 479 3 554 3 402 3 593 66 413 66 540 3 257 3 310 62 263 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun 14 Jun 15 Jun 16 Jun Jun1717 Jun Jun 18 18 › Comprised R77.7 billion (60% of group* revenue) –
Slide 18: Divisional statistics
Divisional statistics OPERATING MARGIN RETURN ON INVESTED CAPITAL* WEIGHTED AVERAGE COST OF CAPITAL* % % % 10.1% 10.4% 13.0% 11.3% 12.9% 11,5% 12,2% 11,8% 5,0% 5,6% 5,6% 5,0% 4,6% 5,2% 7,1% 8,5% 9,0% 9,7% Logistics Motus Group Logistics Motus Group Logistics Motus Group 2017 2018 2017 2018 2017 2018
Slide 19: Agenda
Agenda OVERVIEW CONTEXT OPERATIONS FINANCIAL PATH TO LOOKING REVIEW REVIEW SEPARATION FORWARD 19
Slide 20: Income statement
Income statement 2018 2017 Rm Rm % CHANGE Revenue 128 683 115 889 11 Revenue contribution per division (%) 2018 2017 2018 % 2017 % LOGISTICS 40 43 MOTUS 60 57 20
Slide 21: Income statement
Income statement 2018 2017 Rm Rm % CHANGE Revenue 128 683 115 889 11 Operating profit 6 406 6 049 6 Operating profit margin 5.0 5.2% Operating profit contribution per division (%) 2018 2017 2018 % 2017 % LOGISTICS 44 46 MOTUS 56 54 21
Slide 22: Income statement
Income statement Jun 2018 Jun 2017 Rm Rm % CHANGE Revenue 128 683 115 889 11 Operating profit 6 406 6 049 6 Amortisation of intangible assets arising on business combinations (note 1) (432) (521) Profit on disposal of properties, net of impairments (note 2) 639 212 Impairments of goodwill & other as
Slide 23: Income statement
Income statement Jun 2018 Jun 2017 Rm Rm % CHANGE Net financing costs (note 1) (1 386) (1 680) (18) Income from associates 90 103 Tax (note 2) (1 458) (901) Net profit for the year – before Regent in 2017 3 408 2 286 49 Regent 279 Attributable to minorities (note 3) (135) 36 >100 Attributable to Imp
Slide 24: Financial position
Financial position Jun 2018 Jun 2017 Rm Rm % CHANGE Property, plant & equipment (note 1) 9 829 10 371 (5) Transport fleet (note 2) 5 358 5 560 (4) Vehicles for hire 3 924 3 963 (1) Goodwill & intangible assets (note 3) 9 805 9 529 3 Investments in associates, other investments & other financial asse
Slide 25: Financial position
Financial position Jun 2018 Jun 2017 Rm Rm % CHANGE Total shareholders’ equity (note 1) 23 125 20 261 Net interest bearing borrowings (note 2) 11 566 15 088 (23) Other liabilities 5 584 6 210 Liabilities directly associated with assets classified as held for sale - Equity & liabilities 40 275 41 559
Slide 26: Cash flow – operating activities
Cash flow – operating activities Jun 2018 Jun 2017 Rm Rm % CHANGE Cash generated by operations 8 721 8 388 4 Net working capital movements (excludes currency movements & net acquisitions) (note 1) 811 688 Interest & tax paid (note 2) (2 722) (3 190) Cash flow from operating activities before rental
Slide 27: Cash flow summary
Cash flow summary Jun 2018 Jun 2017 Rm Rm Cash flow from operating activities 5 731 4 177 Investing activities: 890 (1 939) Net disposals / (acquisitions) of subsidiaries & businesses (note 1) 859 (1 687) Capital expenditure – non-rental assets (note 2) 240 (954) Net movement in associates, investme
Slide 28: Gearing
Gearing NET DEBT TO EQUITY › Significant improvement in net debt to equity was supported by: 20 625 • cash proceeds from the sale of non-strategic 18 147 16 515 17 249 properties & businesses; 15 158 107% 15 088 14 325 • an improvement in working capital; 83% 86% 83% 84% 11 591 • a reduction in capi
Slide 29: Returns
Returns ROE ROIC vs WACC 18,7 Rm % 16,8 14,8 15,3 15,0 13,8 12,7 12,8 12,9 11,3 9,7 9,7 9,5 9,0 9,0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2017 2018 2018 ROIC WACC ROE improved due to: ROIC improved due to: › Higher attributable profit › Reduced invested capital from lower net asset levels › H
Slide 30: Agenda
Agenda OVERVIEW CONTEXT OPERATIONS FINANCIAL PATH TO LOOKING REVIEW REVIEW SEPARATION FORWARD 30
Slide 31: Portfolio pre-2014
PORTFOLIO PRE-2014 › Founded in 1948 as a motor dealership & listed on the JSE in 1987, Imperial evolved into one of the country’s largest diversified conglomerates › The Group adopted a federal business model which: • facilitated & encouraged the acquisition, development & growth of large & small b
Slide 32: Fundamental transformation since 2014
FUNDAMENTAL TRANSFORMATION SINCE 2014 › From late 2014 a fundamental transformation was initiated to unlock intrinsic value within the Group › The changes sought to retain the entrepreneurial creativity & capital management excellence while ensuring that the structure, strategies & value proposition
Slide 33: Portfolio rationalisation
Portfolio rationalisation › Substantial portfolio optimisation resulted in: 1. The disposal of assets that did not fit the Group & underlying business unit’s strategies & did not generate sufficient returns on capital or executive effort – 55 businesses & 90 properties that were under performing, of
Slide 34: Organisation structure
Organisation structure › Since 1 July 2016, Imperial Logistics is being managed as one division following the consolidation of the Africa & International businesses under one CEO, significantly improving strategic coherence & capital discipline › From 1 January 2017, Imperial's entire vehicle intere
Slide 35: Disclosure
Disclosure › From 1 July 2016, Imperial Logistics & Motus have been reported on separately, per sub-division, as part of the segmental disclosure: • Separate income statements, balance sheets & most recently ROICs & WACCs per each sub-division › This increase in transparency & disclosure allows for
Slide 36: Rationale for the proposed unbundling of Motus
Rationale for the proposed unbundling of Motus › No operational synergies exist between Imperial Logistics & Motus › Imperial Logistics & Motus operate independently in markets & geographies that are vastly different › Both businesses have different strategic focuses & priorities › With self-sustain
Slide 37: Substantial progress
Substantial progress › Ensuring that the balance sheet of each division is self-sustaining, with an appropriate gearing level to enable each to fund its own growth &strategic aspirations while continuing to pay a stable dividend • Imperial Logistics & Motus have achieved appropriate, self-sufficient
Slide 38: Substantial progress | continued
Substantial progress | continued › An offer to acquire the preference shares was announced on 13 August 2018 • buyback to be implemented during October 2018 • the buyback is an efficient means for Imperial to simplify its capital structure & for preference shareholders to dispose of the preference s
Slide 39: Next steps
Next steps › The unbundling of Motus & its separate listing on the main board of the JSE is still subject to approval by shareholders & the fulfilment of requisite regulatory requirements › Engagement with key investors commenced over a year ago › A combined general meeting for preference shares and
Slide 40: Imperial Logistics: Investment Proposition
Imperial Logistics: Investment Proposition Leading positions in regional markets provide platforms for sustainable growth: market leader in South Africa, a leader in selected industries 1 (Consumer Packaged Goods & Pharmaceuticals) in the African Regions & in certain specialised capabilities in Euro
Slide 41: Motus: Investment Proposition
Motus: Investment Proposition Unique fully integrated business model across the Automotive value chain: import & distribution, retail & rental, motor- related financial 1 services, & aftermarket parts supplier Diversified service provider to the Automotive sector (non-manufacturing) with a leading p
Slide 42: Agenda
Agenda OVERVIEW CONTEXT OPERATIONS FINANCIAL PATH TO LOOKING REVIEW REVIEW SEPARATION FORWARD 42
Slide 43: Prospects for F2019
Prospects for F2019 We anticipate that both Imperial Logistics & Motus will deliver solid operating & financial results in F2019, subject to stable currencies in the economies in which each operates. For the financial year to June 2019, we expect: › Imperial Logistics & Motus will have appropriate c
Slide 44: Thank you
THANK YOU IMPERIAL ¥ LEADERS IN MOBILITY
Slide 45: Annexures
ANNEXURES IMPERIAL ¥ LEADERS IN MOBILITY
Slide 46: Growth trend Logistics South Africa
Growth trend Logistics South Africa REVENUE OPERATING PROFIT Rm Rm 4 year -1% 4 year +4% CAGR= CAGR= 1% 0% 16 498 16 310 939 952 919 952 15 755 15 372 14 447 828 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 › Satisfactory performance in challenging trading conditions: ›
Slide 47: Growth trend Logistics African Regions
Growth trend Logistics African Regions REVENUE OPERATING PROFIT Rm Rm 4 year +9% 4 year +3% CAGR= CAGR= +14% 11 016 10 823 +23% 9 974 9 947 773 740 759 635 6 319 331 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 › Performed below expectation - revenue & operating profit incre
Slide 48: Our African footprint
Our African footprint Pharma & healthcare logistics & supply chain management Pharma distributors (full RTM solution, including sales function) Pharma & medical supplies (wholesaling) (project work across multiple territories) Managed Solutions in East & West Africa, SA & SADC Logistics & supply cha
Slide 49: Growth trend Logistics International
Growth trend Logistics International REVENUE OPERATING PROFIT Rm Rm 4 year +4% 4 year +3% CAGR= CAGR= +6% +4% 23 270 24 266 1 142 1 105 19 512 971 958 1 000 19 249 19 071 Jun 14 Jun 15 Jun 16 Jun17* Jun 17 Jun 18 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 › Grew revenue & operating profit in Rands by 4% and
Slide 50: Logistics International (EURO)
Logistics International (EURO) REVENUE OPERATING PROFIT OPERATING MARGINS €m €m % 0% -1% 5,8% 75,3 74,6 4,8% 4,7% 1 574 1 581 3,7% 45,8 788 793 28,8 2017* 2018 H1 2018 H2 2018 2017 2018 H1 2018 H2 2018 2017 2018 H1 2018 H2 2018 › Revenue was flat & operating profit decreased by 1% in Euros › Revenue
Slide 51: Motus divisional review: Vehicle import & distribution
Motus divisional review VEHICLE IMPORT & DISTRIBUTION › Revenue & operating profit increased by 11% & 8% respectively due to: • 11% increase in new vehicle sales (Hyundai up 4%, Kia up 22% & Renault up 22% per NAAMSA); & • vehicle mix aligned to market demand for consumer affordability › Importer ma
Slide 52: National vehicle sales 2009 – 2018
National vehicle sales 2009 – 2018 IMPERIAL’S SHARE OF TOTAL NAAMSA VEHICLE SALES & GDP GROWTH 800 9% 644 631 639 599 588 600 29 31 31 544 556 6% 530 27 30 495 481 491 15 15 Vehicle units (thousands) 437 441 24 454 446 424 430 26 20 409 400 3% 312 341 GDP growth (%) 200 0% 99 97 117 120 119 117 112
Slide 53: Motus’ market share vs OEMs
Motus’ market share vs OEMs MARKET SHARE* 22,5% 23,4% 15,9% 15,3% 14,9% 13,7% 13,1% 11,7% 10,0% 8,2% 5,2% 4,4% Jun 17 Jun 18 Jun 17 Jun 18 Jun 17 Jun 18 Jun 17 Jun 18 Jun 17 Jun 18 Jun 17 Jun 18 Motus direct imports Mercedes Ford Toyota Volkswagen Nissan Motus › Motus total market share in South Afr
Slide 54: 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 Mar Mar Dec Dec Jun Mar Mar Jun Jun Jun Sep Sep Sep Sep 2014 2015 2016 2017 2018 Euro based cost (ind. Sep14) Dollar based cost (ind. Sep14) Selling price > 48
Slide 55: Motus divisional review: Vehicle retail & rental
Motus divisional review VEHICLE RETAIL & RENTAL › Grew revenue & operating profit by 18% & 14% respectively due to: • new & pre-owned retail sales volumes increased by 33% & 15% respectively • South African margins were enhanced by a realignment of the importer dealership operating model to unlock v
Slide 56: Motus divisional review: Aftermarket parts
Motus divisional review AFTERMARKET PARTS › Grew revenue & operating profit by 8% & 10% respectively, supported by: • good performances from Beekmans & Alert Engine Parts; & • tighter cost control › Performance negatively impacted by market contraction, increased pricing pressure & consumers trading
Slide 57: Divisional review: Motor related financial services
Divisional review MOTOR RELATED FINANCIAL SERVICES › Grew revenue & operating profit by 6% & 7% respectively due to: • higher profitability in demo vehicle sales & maintenance funds; & • positive growth in the VAPS operations › Increased sales of monthly versus longer term service & maintenance plan
Slide 58: 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