Imperial Logistics — FY2017 Earnings Presentation
60 slides from Imperial Logistics's earnings presentation, August 2017
Slide 1: Results Presentation for the Year Ended 30 June 2017
RESULTS PRESENTATION FOR THE YEAR ENDED 30 JUNE 2017
Slide 2: Agenda
AGENDA OPERATIONS FINANCIAL LOOKING OVERVIEW CONTEXT STRATEGY REVIEW REVIEW FORWARD 2
Slide 3: Group Overview
GROUP OVERVIEW GROUP REVENUE OPERATING PROFIT HEPS2 1% 2% 10% R119 517 million R6 538 million 1 390 cents PER SHARE ONGOING REVENUE¹ ONGOING OPERATING PROFIT¹ 5% 3% R115 530 million R6 091 million EPS2 CORE EPS2,3 FULL YEAR DIVIDEND 14% 5% 18% 1 339 cents 1 626 cents 650 cents PER SH
Slide 4: Overview
OVERVIEW > Achieved all strategic, operational & financial objectives announced at start of F 2017 > All activities consolidated into two large, increasingly self-sufficient divisions: Imperial Logistics & Motus • divisional structures in place & ahead of original plans • reporting according to the
Slide 5: Growth Trend in Foreign Operations
GROWTH TREND IN FOREIGN OPERATIONS REVENUE (Rm) OPERATING PROFIT (Rm) 4 year 4 year CAGR= CAGR= 2 240 2 169 16% 19% 49 867 49 728 1 854 40 352 1 493 34 471 27 340 1 103 Jun 13 Jun 14 Jun 15 Jun 16 Jun17 Jun 17 Jun 13 Jun 14 Jun 15 Jun 16 Jun Jun 17 > Foreign revenue unchanged at R49.9bn (43% of grou
Slide 6: Overview
OVERVIEW > Achieved all strategic, operational & financial objectives announced at start of F 2017 > All activities consolidated into two large, increasingly self-sufficient divisions: Imperial Logistics & Motus • divisional structures in place & ahead of original plans • reporting according to the
Slide 7: Growth Trend in Non Vehicle Operations
GROWTH TREND IN NON VEHICLE OPERATIONS REVENUE (Rm) OPERATING PROFIT (Rm) 4 year 4 year= CAGR= CAGR 2 764 11% 13% 2 545 2 543 50 665 47 912 2 241 44 418 41 339 1 682 33 592 Jun 13 Jun 14 Jun 15 Jun 16 Jun17 Jun 17 Jun 13 Jun 14 Jun 15 Jun 16 Jun Jun 17 > Revenue not related to Vehicles up 6% to R50.
Slide 8: Agenda
AGENDA OPERATIONS FINANCIAL LOOKING OVERVIEW CONTEXT STRATEGY REVIEW REVIEW FORWARD 8
Slide 9: Operating Context – Imperial Regions
OPERATING CONTEXT – IMPERIAL REGIONS South Africa (57% revenue; 63% operating profit) > Low economic growth (technical recession in F 2017 3rd quarter) > Rising unemployment (27.6%) > Low business confidence > Fragile consumer health depressing personal income expenditure > Reduction in logistics vo
Slide 10: Operating Context – Imperial Regions
OPERATING CONTEXT – IMPERIAL REGIONS Eurozone, UK & Australia (33% revenue; 24% operating profit) > 80-year low water levels on the Rhine > Lower demand & pricing pressures in steel, energy, commodities & construction sectors in Germany > Steady UK economy supporting logistics & vehicles businesses
Slide 11: Agenda
AGENDA OPERATIONS FINANCIAL LOOKING OVERVIEW CONTEXT STRATEGY REVIEW REVIEW FORWARD 11
Slide 12: Imperial's Strategic Challenges
IMPERIAL’S STRATEGIC CHALLENGES > High market shares in logistics & vehicles in structurally low growth RSA > Currency: • R14.0bn imports (vehicles & parts); R8.0bn foreign debt; 4 major currencies (ZAR, US$, €, ₤, A$); 17 secondary currencies • currency volatility affects competitiveness & hedging
Slide 13: Progress Against Strategy
PROGRESS AGAINST STRATEGY Since H1 2015, we have directed our efforts as a holding company to enhancing the sustainable competitive position of our subsidiaries through: 1. Portfolio coherence (logical agglomeration that facilitates value creation): • Disposals: 42 businesses & 52 properties that we
Slide 14: The Role of Imperial Holdings
THE ROLE OF IMPERIAL HOLDINGS The rationalisation of the portfolio & the clarification of strategy resulted in Imperial’s activities being consolidated into two large, increasingly self-sufficient divisions: Imperial Logistics & Motus, now separately established & reported on as Imperial’s only oper
Slide 15: 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 > Regent Group (excluding the retained VAPS business) for R1.8bn on 26 June 2017 > Non-strategic properties for which R
Slide 16: Capital Allocation Objective 1 (cont.)
CAPITAL ALLOCATION OBJECTIVE 1 (CONT.) Disposals in progress: > Non-strategic properties: 21 properties with carrying value of R979m held for sale > Imperial has commenced a transaction process to introduce a direct 30% BBBEE shareholding (including Black Women) into Imperial Logistics South Africa,
Slide 17: 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 Acquisitions: > Logistics South Africa acquired a 70% stake in Sasfin Premier Logistics for R38m in July 2016 > Logistics South Africa acq
Slide 18: 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 & secondarily to expand our Motus businesses in the region Acquisitions: > 70% of Surgipha
Slide 19: 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 Acquisitions: > 95% of Palletways for R3.0bn* (£155m), effective 5th July 2016 > Palletways acquired 100% of Topco in Italy for R14
Slide 20: Capital Allocation Objective 5
CAPITAL ALLOCATION OBJECTIVE 5 The development & sustainability of Imperial will be underpinned by investment in human capital & information systems 2017 Capex on HC & IS > R371m Human Capital > Investment in CPO’s & HC practitioners, Enterprise Architecture & HC IS > Foundations of Executive Talent
Slide 21: Capital Allocation Objective 5 (cont.)
CAPITAL ALLOCATION OBJECTIVE 5 (CONT.) Information Systems > Major systems implementations: • Logistics Africa – SAP, Microsoft Dynamics & other • Logistics International – Integration of SAP Finance, TalentSoft, Global unified Transport Management System, Imperial Fleet Management System • Vehicle
Slide 22: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 22
Slide 23: Imperial's Divisions
IMPERIAL’S DIVISIONS IMPERIAL LOGISTICS MOTUS REGENT (discontinued) REVENUE REVENUE REVENUE 6% 3% 12% R50.7 billion R66.5 billion R2.7 billion 43% contribution 57% contribution OPERATING PROFIT OPERATING PROFIT OPERATING PROFIT 9% 3% 13% R2.8 billion R3.3 billion R489 million 45% contrib
Slide 24: Divisional Overview – Imperial Logistics
DIVISIONAL OVERVIEW – IMPERIAL LOGISTICS Imperial Logistics is active mainly in Africa & Europe, with established capabilities in transportation, warehousing & distribution management. Our expertise & experience in each of these enable us to provide integrated supply chain & route-to-market solution
Slide 25: Imperial's Divisions – Logistics
IMPERIAL’S DIVISIONS Strategic objectives LOGISTICS > To grow revenues, profits & returns by increasing principals, products & markets within & adjacent to our spheres of competence > To develop & acquire less capital-intensive higher return businesses with strong revenue growth potential & cash flo
Slide 26: Growth Trend Logistics South Africa
GROWTH TREND LOGISTICS SOUTH AFRICA REVENUE (Rm) OPERATING PROFIT (Rm) 4 year +12% 4 year +15% CAGR CAGR =+5% =+8% 953 952 939 16 207 15 755 15 372 828 14 447 13 444 698 Jun 13 Jun 14 Jun 15 Jun 16 Jun17 Jun 17 Jun 13 Jun 14 Jun 15 Jun 16 Jun Jun 17 > Strong performance supported by increased volume
Slide 27: Growth Trend Logistics African Regions
GROWTH TREND LOGISTICS AFRICAN REGIONS REVENUE (Rm) OPERATING PROFIT (Rm) 4 year -15% 4 year -3% CAGR CAGR =+20% =+35% 773 746 11 016 9 974 635 9 356 6 319 331 4 565 222 Jun 13 Jun 14 Jun 15 Jun 16 Jun17 Jun 17 Jun 13 Jun 14 Jun 15 Jun 16 Jun Jun 17 > Performance depressed by slowing economic growth
Slide 28: Growth Trend Logistics International
GROWTH TREND LOGISTICS INTERNATIONAL REVENUE (Rm) OPERATING PROFIT (Rm) 4 year +24% 4 year +11% CAGR CAGR =+12% =+10% 24 220 1 105 1 000 971 958 19 512 19 249 19 071 762 15 574 Jun 13 Jun 14 Jun 15 Jun 16 Jun17 Jun 17 Jun 13 Jun 14 Jun 15 Jun 16 Jun Jun 17 > Revenue & operating profit increased 24%
Slide 29: Logistics International (Euro)
LOGISTICS INTERNATIONAL (EURO) REVENUE (€m) OPERATING PROFIT (€m) OPERATING MARGINS (%) +26% +19% 1 638 75,4 5,0% 5,0% 4,6% 1 298 62,6 4,0% 46,1 843 795 29,3 2016 2017 H1 2017 H2 2017 2016 2016 2017 2017 H1 2017 H2 2017 2016 2017 H1 2017 H2 2017 > The performance in Rand terms was depressed by an 8%
Slide 30: Imperial Logistics (Total)
IMPERIAL LOGISTICS (TOTAL) REVENUE (Rm) OPERATING PROFIT (Rm) 4 year 67% foreign 4 year 67% foreign CAGR CAGR 2 764 =11% =+13% 2 545 2 543 50 665 47 912 2 241 44 418 41 339 1 682 33 592 Jun 13 Jun 14 Jun 15 Jun 16 Jun17 Jun 17 Jun 13 Jun 14 Jun 15 Jun 16 Jun Jun 17 > Solid revenue growth trend > Com
Slide 31: Imperial's Divisions – Motus
IMPERIAL’S DIVISIONS Strategic objectives MOTUS > To secure growth & returns through deep direct relationships with leading OEM’s, optimal distribution techniques, creative marketing, new dealership & client interface models, shared support facilities & loyalty engendering financial services > To co
Slide 32: Divisional Overview – Motus
DIVISIONAL OVERVIEW – MOTUS Motus operates across the value chain importing, distributing, retailing & renting vehicles & aftermarket parts, supported & augmented by motor related financial services MOTUS VEHICLE IMPORT VEHICLE RETAIL AFTERMARKET MOTOR-RELATED & DISTRIBUTION & RENTAL PARTS FINANCIAL
Slide 33: 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 Vehicle units (thousands) 481 491 15 437 441 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 34: Imperial's Market Share vs OEMs
IMPERIAL’S MARKET SHARE VS OEMS MARKET SHARE* (%) 22,5% 20,6% 19,9% 19,7% 16,2% 15,9% 13,1% 12,9% 8,2% 7,4% 5,3% 5,2% Jun 16 Jun 17 Jun 16 Jun 17 Jun 16 Jun 17 Jun 16 Jun 17 Jun 16 Jun 17 Jun 16 Jun 17 Imperial Mercedes Ford Toyota Volkswagen Nissan > Imperial’s total market share was maintained com
Slide 35: Divisional Review: Vehicle Import & Distribution
DIVISIONAL REVIEW VEHICLE IMPORT & > Revenue & operating profit declined due to: • lower vehicle sales volumes resulting from market DISTRIBUTION contraction; & • underperformance from Renault Partially offset by: • solid performances from Hyundai & Kia; • assistance from manufacturers; • a change i
Slide 36: Car Parc of Imperial Imported Brands
CAR PARC OF IMPERIAL IMPORTED BRANDS 1 192 798 1 116 939 1 037 878 956 666 865 636 769 295 669 785 576 155 487 701 431 580 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 > Car parc of approximately 1.2 million vehicles, continues to grow at a steady pace > The growing car parc provides an underpi
Slide 37: South African New Vehicle Prices
SOUTH AFRICAN NEW VEHICLE PRICES SELLING PRICE VS CURRENCY COST OF IMPORTED PRODUCT (%) Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun 2014 2015 2016 2017 Based to 100 Euro based cost (ind. Mar14) Dollar based cost (ind. Mar14) Selling price > 41% imports in USD > 59% imports in EUR 37
Slide 38: Divisional Review: Vehicle Retail & Rental
DIVISIONAL REVIEW VEHICLE RETAIL & RENTAL > Revenue & operating profit increased assisted by price increases & cost containment, despite subdued vehicle sales volumes > Across the year 15 dealerships were closed in RSA > Passenger, LCVs & commercial vehicles experienced a 6% decline in new vehicle s
Slide 39: Divisional Review: Aftermarket Parts
DIVISIONAL REVIEW AFTERMARKET PARTS > Grew revenue & operating profit enhanced by: • price increases; • change in the sales mix; & • a good performance from Alert Engine Parts > AAAS (Midas) recorded a marginal increase in revenue & operating profit as the business was negatively impacted by the dis
Slide 40: Divisional Review: Motor Related Financial Services
DIVISIONAL REVIEW > Grew revenue & operating profit despite declining new vehicle MOTOR RELATED sales FINANCIAL SERVICES > Higher profitability was experienced in demo sales & rental income due to higher business volumes & an increase in sales by vehicle importers to car rental companies > Profitabi
Slide 41: Motus (Total)
MOTUS (TOTAL) REVENUE (Rm) OPERATING PROFIT (Rm) 4 year 24% foreign 4 year CAGR CAGR =+3% =-5% 12% foreign 68 479 66 540 66 413 4 013 62 263 58 528 3 554 3 402 3 310 3 257 Jun 13 Jun 14 Jun 15 Jun 16 Jun17 Jun 17 Jun 13 Jun 14 Jun 15 Jun 16 Jun Jun 17 > Comprised R66.5bn (57%) of group revenue for t
Slide 42: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 42
Slide 43: Income Statement
INCOME STATEMENT 2016 2017 Rm Rm % CHANGE Revenue (including discontinued) 118 849 119 517 1% LOGISTICS 6% Assisted by the Palletways & Itumele acquisitions; a strong performance from Logistics South REVENUE* Africa; offset by currency impacts CONTRIBUTION (strong Rand, weak Naira & PER DIVISION M
Slide 44: Income Statement
INCOME STATEMENT 2016 2017 Rm Rm % CHANGE Revenue (including discontinued operations) 118 849 119 517 1 Operating profit (including discontinued operations) 6 382 6 538 2 Operating profit margin 5.4% 5.5% LOGISTICS 9% Assisted by the Palletways & OPERATING PROFIT* Itumele acquisitions; excellent C
Slide 45: Divisional Statistics
DIVISIONAL STATISTICS OPERATING MARGIN (%) 5,5% 5,5% 5,4% 5,3% 5,0% 5,0% Logistics Motus Group 2016 2017 RETURN ON INVESTED CAPITAL (%) 12,8% 12,4% 12,2% 11,8% 11,8% 11,5% Logistics Motus Group 2016 2017 WEIGHTED AVERAGE COST OF CAPITAL (%) 10,2% 10,1% 9,5% 9,0% 7,6% 7,1% Logistics Motus Group 2016
Slide 46: Income Statement
INCOME STATEMENT 2016 2017 Rm Rm % CHANGE Revenue 118 849 119 517 1 Operating profit 6 382* 6 538 2 Amortisation of intangible assets arising on business combinations (437) (521) 19 Profit / (loss) on disposal of properties, net of impairments 28 212 Impairments of goodwill and other assets (498) (1
Slide 47: Income Statement
INCOME STATEMENT 2016 2017 Rm Rm % CHANGE Net financing costs (1 440) (1 680) 17 Income from associates 138 103 (25) Tax (1 221) (1 060) Net profit for the year 3 181 2 565 (19) Attributable to minorities (184) 36 Attributable to Imperial shareholders 2 997 2 601 (13) > Net financing costs increased
Slide 48: Financial Position
FINANCIAL POSITION 2016 2017 Rm Rm % CHANGE Property, plant & equipment 11 602 10 371 (11) Transport fleet 5 953 5 560 Vehicles for hire 3 469 3 963 14 Goodwill & intangible assets 7 501 9 529 27 Associates, investments & loans 1 397 1 807 29 Other assets 1 871 1 839 Net working capital 9 804 8 956
Slide 49: Financial Position
FINANCIAL POSITION 2016 2017 Rm Rm % CHANGE Total shareholders’ interest 19 775 20 261 2 Net interest bearing borrowings (including preference shares) 16 516 15 088 (9) Other liabilities 8 576 7 655 Liabilities directly associated with assets classified as held for sale 3 017 - Equity & liabilities
Slide 50: Cash Flow – Operating Activities
CASH FLOW – OPERATING ACTIVITIES 2016* 2017 Rm Rm % CHANGE Cash generated by operations 8 931 8 388 (6) Net working capital movements (788) 688 (excludes currency movements & net acquisitions) Interest & tax paid (3 371) (3 190) Cash flow from operating activities before rental assets capex 4 772 5
Slide 51: Cash Flow Summary
CASH FLOW SUMMARY 2016* 2017 Rm Rm Cash flow from operating activities 3 161 4 177 Investing activities: (1 588) (1 939) Net disposals / (acquisitions) of subsidiaries & businesses 760 (1 687) Capital expenditure - non-rental assets (2 527) (954) Net movement in associates, JVs, investments, loans &
Slide 52: Gearing
GEARING Net debt to equity > Net debt to equity reduced from 73% to 71% (98% at December 2016), supported by: • cash proceeds from the sale of 98% Regent & non-strategic properties; • an improvement in working capital; 79% • a reduction in capital expenditure; 76% 73% • partially offset by the acqui
Slide 53: Returns
RETURNS ROE (%) ROIC vs WACC 17,2 21 14,7 19 13,1 17 12,8 12,4 15 13 9,4 9,5 9,0 9,0 9,0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 ROIC WACC ROE affected by: ROIC impacted by: > Attributable profits down 13% > Increase in average invested capital > An increase of 3% in Equity on prior year 5
Slide 54: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 54
Slide 55: Prospects for 2018
PROSPECTS FOR 2018 > Conditions remain challenging • South Africa’s socio-political & economic outlook is fragile • Internationally, geopolitics & central banks could dampen growth & influence capital flows > The impact of this unpredictable environment on sentiment, economic activity & the volatili
Slide 56: Thank You
IMPERIAL Y LEADERS IN MOBILITY
Slide 57: Annexures
IMPERIAL Y LEADERS IN MOBILITY
Slide 58: Imperial Logistics African Regions
IMPERIAL LOGISTICS AFRICAN REGIONS West Africa > Imperial Health Sciences – pharma logistics, supply chain management, warehousing > MDS Logistics – transport, distribution, warehousing (FMCG, pharma, telecoms) > Eco Health – distribution, sales, marketing of pharma products MALI > Imres – a wholesa
Slide 59: Divisional Review: Regent
DIVISIONAL REVIEW REGENT > The sale of Regent Group was approved by the Financial Services Board on 26 June 2017 (Sold) Performance > Regent’s underwriting result decreased by 8% mainly due to the sale of the African operations in January 2017 > Performance was supported by an improved result in the
Slide 60: 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