Imperial Logistics — Imperial Holdings — H1 2014 Earnings Presentation
69 slides from Imperial Logistics's earnings presentation, February 2014
Slide 1: Interim results presentation
Interim results presentation For the six months ended 31 December 2013
Slide 2: Agenda
Agenda Highlights and Summary of Performance Divisional performance Financial review Group prospects and strategy Questions 2
Slide 3: Highlights
Highlights Revenue Operating profit HEPS +13% to +8% to Flat at R51 357 million R3 166 million 831 cps Diluted Core EPS* Dividend per share** ROE +10% to Interim dividend + 5% to 915 cps 400 cps 21% * Diluted Core EPS excludes once-off and non-operational items, mainly: − charge for amending convers
Slide 4: Business conditions in key markets
Business conditions in key markets » Challenging trading conditions in South Africa & Europe • SA economy sluggish: volumes still subdued, especially in manufacturing and consumer markets • Germany: steel industry remains depressed; activity levels across core markets (incl. shipping & chemicals) un
Slide 5: Performance of the three business pillars
Performance of the three business pillars Logistics Financial Services Revenue = R20 bn Revenue = R31 bn Revenue = R2 bn -5% 26% 8% Operating profit = R1,1 bn Operating profit = R1,7 bn Operating profit= R0,5 bn -7% 50% 11% 5
Slide 6: Performance of Imperial
Performance of Imperial » Good first half performance; portfolio of businesses proved to be resilient » Operating profit from foreign operations up to R 712 million - 22% of operating profit » Profit from African operations outside of SA up 31% to R240m » Excellent performance from Africa Logistics
Slide 7: Divisional performance
IMPERIAL © FAST MOVING FORWARD THINKING Divisional performance
Slide 8: Performance of the three business pillars
Performance of the three business pillars Logistics Revenue = R20 bn 26% Operating profit = R1,1 bn 50% 8
Slide 9: Logistics
Logistics Africa International » South Africa » Europe (mainly Germany) » Rest of Africa » Recent entry into South America Revenue contribution Revenue contribution (incl. inter-segment revenue) (incl. inter-segment revenue) R11bn R9bn 9
Slide 10: Strong growth in logistics over the past four years
Strong growth in logistics over the past four years Revenue (R bn) Operating profit (R m) 4 yr CAGR = 24% 4 yr CAGR = 21% 1.062 20,0 971 17,7 793 15,9 15,2 715 708 12,5 592 563 544 10,9 498 9,7 8,4 8,3 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H1 2010 H2 2010 H1 2011 H2
Slide 11: Africa Logistics
Africa Logistics Revenue (Rm) Operating profit (Rm) Operating Margins +26% +63% 10.895 6,0% 5,6% 650 8.677 4,6% 400 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H2 2013 Excellent performance » Strong revenue growth • positive contribution from recent acquisitions; prior year included impact of in
Slide 12: Service Offerings
Service Offerings Freight and Warehousing Distribution and Demand Integration transport and Storage Fulfillment Management Services POINT SOLUTIONS » From A to B » Bulk commodities » Dedicated » Outsourced specialist » Supply chain design sales » Dedicated Fleet » Full pallets » Multi-principal » Pr
Slide 13: The strategy in the Rest of Africa
The strategy in the Rest of Africa OUR CLIENT’S NEEDS IN THE REST OF AFRICA Get me there… Sell my product Establish my brand Market intelligence Warehousing Sales and understanding Transport Marketing Promotion Supply chain Distribution Brand activation management We are fast becoming the undisputed
Slide 14: Potential of the African consumer
Potential of the African consumer By 2020,more than half of African households will have discretionary spending power Share of households in each income bracket % millions of households Household income brackets 100% = 163m 196m 244m $PPP1 2005 6 8 Globals 12 (>20,000) Discretionary 11 14 Consuming
Slide 15: Imperial's footprint in the rest of Africa
Imperial’s footprint in the rest of Africa » Infrastructure in 11 countries » Cross border transportation into 18 countries » Over 75 regional, local and general freight and distributor warehouses » R2,8 bn logistics and Mali Niger North Sudan distribution turnover in the rest of Africa Guinea-Bissa
Slide 16: Imperial's footprint in the rest of Africa: West Africa
Imperial’s footprint in the rest of Africa West Africa Benin » Imperial Health Sciences – pharmaceutical logistics, supply chain management, warehousing » MDS Logistics – transport, distribution, warehousing (FMCG, pharma, telecoms) » Ecohealth acquisition – distribution, sales, marketing of pharmac
Slide 17: Imperial's footprint in the rest of Africa: East Africa
Imperial’s footprint in the rest of Africa East Africa » Imperial Health Sciences – consumer, health and pharmaceutical warehousing and distribution (Facilities being expanded in Nairobi) » Tanzania & Malawi – FMCG distribution, sales & marketing Imperial Logistics owns facilities Countries serviced
Slide 18: Imperial's footprint in the rest of Africa: SADC
Imperial’s footprint in the rest of Africa SADC Benin » FMCG distribution, sales & marketing (Swaziland, Lesotho, Namibia, Botswana, Zambia, Zimbabwe and Mozambique) » Further expansion of facilities » Transport operations – cross border, load consolidation, warehouse management, cross border docume
Slide 19: Ecohealth acquisition
Ecohealth acquisition »Entered into an agreement to acquire 53% in Ecohealth Limited • leading distributor of pharmaceutical products (Ethical, Generics and Over the Counter (“OTC”) products) in Nigeria • turnover = approx. $180m • cash consideration of USD 74 million • Funded by Sumitomo Mitsui Ban
Slide 20: Ecohealth in the value chain
Ecohealth in the value chain Pharmacies Ecohealth Retailers Consumer Hospitals Clinics 20
Slide 21: Ecohealth acquisition
Ecohealth acquisition Ecohealth » Leading player • distributes, sells and markets pharmaceutical products • for multinational pharmaceutical companies with long-established relationships • significant Ethical (branded) market share • network: 4 200 secondary and tertiary hospitals, 8 000 pharmacies
Slide 22: International Logistics
IMPERIAL © FAST MOVING FORWARD THINKING International Logistics
Slide 23: International Logistics (EURO)
International Logistics (EURO) Revenue (€m) Operating profit (€m) Operating Margins +1% +7% 675 669 5,3% 4,6% 4,3% 31 29 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H2 2013 Satisfactory performance » Challenging trading conditions » Focus on fleet optimisation » Satisfactory performance from Leh
Slide 24: International Logistics (ZAR)
International Logistics (ZAR) Revenue (Rm) Operating profit (Rm) Operating Margins +26% +34% 9110 5,4% 7211 4,5% 4,3% 412 308 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H2 2013 Exchange rate benefit » H1 2014 Average R/€: 13.50 vs H1 2013 Average R/€: 10.79 » Effective currency hedge in group p
Slide 25: International business by division
International business by division Presence in Europe Strategically located: » Germany is the base - 83% of global merchandise trade volumes are in the Northern Hemisphere Inland Shipping Panopa Lehnkering Neska » Europe » Contract Logistics » Logistics services & » Leading player in » >700 inland v
Slide 26: International expansion
International expansion » Strategy to follow customers/products » Recently entered the South American market • long term contract secured • transport iron ore from Brazil to Argentina along the Rio Parana river » China entry • small office, services H&M (fashion retailer) 26
Slide 27: Project Hidrovía Paraná Paraguay (HPP)
Project Hidrovía Paraná Paraguay (HPP) The Paraná-Paraguay waterway system » Foothold in South America » Will contribute from H2 F2014 » Scope • transport of Iron ore from Corumbá, Brazil to steel mill in Argentina • operations started in February 2014 » Distance • 2,400 km ( 10x Rotterdam-Duisburg)
Slide 28: Milestones of Project HPP
Milestones of Project HPP Rebuilding of Pushboats Vessels commissioned within Transport to Paraguay and Barges 11 months 28
Slide 29: Performance of the three business pillars
Performance of the three business pillars Logistics Revenue = R20 bn Revenue = R31 bn 26% 8% Operating profit = R1,1 bn Operating profit = R1,7 bn -7% 50% 29
Slide 30: Automotive and Industrial
Automotive and Industrial Distribution, retail and Automotive retail Other segments Allied Services » Hyundai, KIA, Renault, Tata, » Dealership franchisee activities » Car Rental Mitsubishi, Daihatsu, Kawasaki on behalf of locally based OEMs » Used car sales » Goscor » Beekman canopies » Panelshops
Slide 31: Distribution, Retail and Allied Services
Distribution, Retail and Allied Services Revenue (Rm) Operating profit (Rm) Operating Margins +3% -19% 8,8% 13.378 13.028 8,5% 1.150 7,0% 934 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H2 2013 Under pressure » More competitive market » Currency weakness – price increases; margin pressure » Good
Slide 32: Growing car parc
Growing car parc 1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 » Car parc doubled over past 5 years » Parts and Services continue to grow strongly » Provides an underpin to earnings Note: Includes Hyundai, Kia, Daihats
Slide 33: Automotive Retail
Automotive Retail Revenue (Rm) Operating profit (Rm) Operating Margins +20% +26% 13.108 377 10.926 3,0% 2,9% 2,7% 299 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H2 2013 Excellent performance » Strong revenue growth; improved operating margin » Commercial vehicle sales up strongly – 22% volume g
Slide 34: South African new vehicle sales
South African new vehicle sales » Price increases due to sustained currency weakness » Interest rate hikes to impact negatively » Credit availability and replacement cycle provides an underpin » On average 27% of the car parc gets replaced every 3 years » Underpenetrated market relative to developed
Slide 35: Car Rental
Car Rental Revenue (Rm) Operating profit (Rm) Operating Margins +9% +8% 1.867 11,0% 11,2% 11,3% 1.706 206 191 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H2 2013 Tough trading conditions » Revenue in core rental business flat - revenue days declined 5% and revenue per day up 4% » Utilisation dow
Slide 36: Autoparts
Autoparts Revenue (Rm) Operating profit (Rm) Operating Margins +9% +8% 6,7% 2.466 6,4% 6,3% 2.264 156 144 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H2 2013 Steady growth » Midas and Alert Engine Parts performed satisfactorily in a competitive and mature market » Afintapart, the commercial vehi
Slide 37: Aggregate aftermarket parts and industrial
Aggregate aftermarket parts and industrial Revenue (Rm) Operating profit (Rm) Operating Margins +13% +4% 3.725 3.311 7,9% 271 7,3% 7,4% 260 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H2 2013 Significant contributor to group » These businesses contributed R3.7 billion of turnover and R271 millio
Slide 38: Growth trend - aftermarket parts and industrial products
Growth trend - aftermarket parts and industrial products Good returns on capital Revenue (Rm) 3.725 » Strategy to add aftermarket vehicle parts, 3.311 components, industrial equipment and new 2767 areas of distribution 2501 » Includes Midas, Turbo Exchange, Goscor, E-Z- GO, Datadot, Segway, Jurgens,
Slide 39: Performance of the three business pillars
Performance of the three business pillars Logistics Financial Services Revenue = R20 bn Revenue = R31 bn Revenue = R2 bn -5% 26% 8% Operating profit = R1,1 bn Operating profit = R1,7 bn Operating profit= R0,5 bn -7% 50% 11% 39
Slide 40: Financial Services
Financial Services Insurance Other » Short term and life » Maintenance plans, service plans, warranties » Motor insurance, value added products and » Alliances with banks and leasing partners goods-in-transit cover » Vehicle tracking Revenue contribution Revenue contribution (incl. inter-segment rev
Slide 41: Financial Services
Financial Services Revenue (Rm) Operating profit (Rm) -5% +11% 2.165 2.055 543 491 H1 2014 H1 2013 H1 2014 H1 2013 Operating profit split Net Underwriting Margin Investment income, including fair value adjustments Underwriting result 9,2% 8,6% Other Financial Services 7,2% 543 491 168 151 138 119 23
Slide 42: Financial Services
Financial Services » Good performance » Insurance underwriting +16% • challenging underwriting conditions • exited non-performing classes of business » Good performance from Regent Life; gross written premiums up 11% » Investment returns higher - equity markets favourable » Botswana & Lesotho contin
Slide 43: Earnings underpin in difficult new vehicle market
Earnings underpin in difficult new vehicle market Financial Services Parts and Service Revenues R2bn revenue +/- R5bn revenue R543m contribution to group operating profit » Short term and Life Insurance , incl. Value Added » Automotive Retail and Distribution, Retail Products and Warranties and Alli
Slide 44: Financial Review
IMPERIAL © FAST MOVING FORWARD THINKING Financial Review
Slide 45: Income statement
Income statement Rm H1 2014 H1 2013 % Change Revenue 51 357 45 262 13% » Logistics: +26%; new contract gains in SA, growth in Rest of Africa, acquisitions and weak currency » Automotive & Industrial: +8%; growth in new and used vehicle sales; growth in annuity revenues from parts and service » Finan
Slide 46: Income statement
Income statement Rm H1 2014 H1 2013 % Change Revenue 51 357 45 262 13% Operating profit 3 166 2 940 8% Operating profit margin 6.2% 6.5% » Logistics + 50% ; rationalisation, contract gains; currency weakness, strike impact in prior year » Automotive & Industrial -7%; weak currency impacted margins a
Slide 47: Divisional statistics
Divisional statistics Operating margin % H1 2014 H1 2013 26,4% 22,7% 11,0% 11,2% 8,8% 6,0% 7,0% 6,3% 6,4% 4,6% 4,5% 4,3% 2,9% 2,7% Africa Logistics International Distribution, Automotive Retail Car Rental Autoparts Financial Services Logistics Retail & Allied Services Return On Invested Capital H1 2
Slide 48: Income statement
Income statement Rm H1 2014 H1 2013 % Change Revenue 51 357 45 262 13% Operating profit 3 166 2 940 8% Amortisation of intangible assets (147) (110) Foreign exchange gains 28 47 Fair value losses on foreign exchange derivatives (44) (42) Business acquisition costs (8) (5) Recoupments from sale of pr
Slide 49: Income statement
Income statement Rm H1 2014 H1 2013 % Change Revenue 51 357 45 262 13% Operating profit 3 166 2 940 8% Amortisation of intangible assets (147) (110) Foreign exchange gains/(losses) 28 47 Fair value gains and (losses) on foreign exchange derivatives (44) (42) Business acquisition costs (8) (5) Recoup
Slide 50: Income statement
Income statement Rm H1 2014 H1 2013 % Change Revenue 51 357 45 262 13% Operating profit 3 166 2 940 8% Amortisation of intangible assets (147) (110) Foreign exchange gains/(losses) 28 47 Fair value gains and (losses) on foreign exchange derivatives (44) (42) Business acquisition costs (8) (5) Recoup
Slide 51: Balance sheet
Balance sheet Rm H1 2014 H1 2013 % Change Property, plant and equipment 10 023 8 545 17% Transport fleet 5 273 4 399 20% Vehicles for hire 2 670 2 688 Intangible assets 5 727 4 420 30% Investments and loans 4 914 4 138 19% Other assets 1 911 1 652 16% » PPE increased mainly due to : • acquisition of
Slide 52: Balance sheet
Balance sheet Rm H1 2014 H1 2013 % Change Property, plant and equipment 10 023 8 545 17% Transport fleet 5 273 4 399 20% Vehicles for hire 2 670 2 688 Intangible assets 5 727 4 420 30% Investments and loans 4 914 4 138 19% Other assets 1 911 1 652 16% » Intangible assets increased due to: • acquisit
Slide 53: Balance sheet
Balance sheet Rm H1 2014 H1 2013 % Change Property, plant and equipment 10 023 8 545 17% Transport fleet 5 273 4 399 20% Vehicles for hire 2 670 2 688 Intangible assets 5 727 4 420 30% Investments and loans 4 914 4 138 19% Other assets 1 911 1 652 16% Net working capital 8 223 5 586 47% Cash resourc
Slide 54: Balance sheet
Balance sheet Rm H1 2014 H1 2013 % Change Total shareholders’ interest 18 839 16 342 15% Interest bearing borrowings 13 298 11 088 20% Other liabilities 8 297 7 218 15% Equity and liabilities 40 434 34 648 » Equity Impacted by: • higher retained income • dividend paid of R1,1bn • gains arising on tr
Slide 55: Cash flow – operating activities
Cash flow – operating activities Rm H1 2014 H1 2013 % Change Cash generated by operations 4 328 4 285 Net working capital movements (2 244) (1 489) 51% Cash generated by operations pre-capital expenditure 2 084 2 796 Net finance costs and tax paid (945) (960) Cash flow from operating activities pre
Slide 56: Cash flow – investing activities
Cash flow – investing activities Rm H1 2014 H1 2013 % Change Net acquisition of subsidiaries and businesses 148 38 Capital expenditure (1 662) (1 128) 47% Expansion (1 015) (597) Replacement (647) (531) Net movement in associates and JV’s (75) (25) Net movement in investments, loans and non-current
Slide 57: Cash flow – summary
Cash flow – summary Rm H1 2014 H1 2013 Cash flow from operating activities (pre capex) 1 139 1 836 Net acquisition of subsidiaries and businesses 148 38 Capital expenditure in total (2 214) (1 863) Net movement in associates and JV’s (75) (25) Net movement in equities, loans and other (129) (854) He
Slide 58: Gearing
Gearing » New bond (IPL 8) issued – R1.5bn 12000 100% Net interest-bearing debt (LHS) » Higher net debt to fund: Net gearing % (RHS) 10000 • acquisitions 80% • normalised working capital 8000 • expansion mainly in Logistics 60% 62% • weak currency 6000 52% » Capacity for further acquisitions and 48%
Slide 59: Returns
Returns ROE# ROIC vs WACC 23,4 23,0 24 18 16,3 21,0 16,5 16,2 20,3 20 17,1 14 15,1 16 11,5 12,2 12 10 10,9 9,4 10,5 10,1 9,7 8,9 8 8,8 6 4 0 2 F2014^^ F2009 F2010 F2011 F2012 F2013 F2009 F2010 F2011 F2012 F2013 H1 2014 ROIC WACC # based on core earnings ^^ annualised » ROE is healthy » Objective: Av
Slide 60: Strategy
IMPERIAL © FAST MOVING FORWARD THINKING Strategy
Slide 61: Key growth strategy
Key growth strategy Auto and Financial services Logistics Cash Enrich value chain Expansion, Growth, Generate cash flow Acquisitions Excess cash: Healthy dividends; Share buy backs Shareholders 61
Slide 62: Strategy
Strategy » Main objective continues to improve the group’s return on capital • ongoing focus on subscale and low return businesses » Seeking growth opportunities in and adjacent to existing industries and geographies » Focused on expanding our footprint in the logistics industry in Africa and intern
Slide 63: Growth trend in foreign businesses
Growth trend in foreign businesses Revenue (Rbn) Operating profit (Rm) 13,3 12,0 509 472 Rest of the world 10,3 430 9,8 Rest of Africa 357 7,0 6,0 241 240 5,2 207 214 183 158 163 3,4 140 135 2,5 2,8 2,8 99 1,9 2,2 1,2 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Dec-10 Jun-11 Dec-11 Jun-12 Dec-1
Slide 64: Growth trend of services in automotive businesses
Growth trend of services in automotive businesses Annuity earnings Revenue (Rm) » Positive growth trend in services 2.162 1.918 » Benefiting from growing car parc 1.866 1.710 » Parts growth follow a similar trend 1.563 1.552 1.399 » Provides earnings underpin in 1 214 1.136 automotive businesses Dec
Slide 65: Ukhamba restructure and OTC listing
Ukhamba restructure and OTC listing » BEE deal implemented to create value for 15 500 employees in 2004 » Investments include: • effective 10.1% shareholding in Imperial Group • 32% shareholding in Distribution and Network Warehousing Limited(DAWN) » Created approximately R1bn of value for beneficia
Slide 66: Prospects
IMPERIAL © FAST MOVING FORWARD THINKING ae Prospects
Slide 67: Prospects
Prospects » Well positioned to grow organically and through acquisitions » Prospects for Africa Logistics positive • gaining more business ; further benefits from rationalisation • continue expansion into the rest of Africa; will benefit from Ecohealth acquisition » International Logistics • well po
Slide 68: Appointment of CEO
Appointment of CEO » Recently announced the appointment of Mark Lamberti as CEO » Effective 1 March 2014 » Founded Massmart » Former director of Wooltru, Primedia, Datatec and Altron » Experience, exceptional leadership skills and expertise » Hubert Brody will remain on the Board as a non-executive
Slide 69: Questions
IMPERIAL © FAST MOVING FORWARD THINKING Questions