Imperial Logistics — H1 2017 Earnings Presentation
61 slides from Imperial Logistics's earnings presentation, February 2017
Slide 1: Results Presentation for the Six Months Ended 31 December 2016
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
Slide 2: Agenda
AGENDA OPERATIONS FINANCIAL LOOKING OVERVIEW CONTEXT STRATEGY REVIEW REVIEW FORWARD 2
Slide 3: Group Overview
GROUP OVERVIEW GROUP REVENUE OPERATING PROFIT HEPS 2% 4% 15% R61 253 million R3 181 million 682 cents PER SHARE ONGOING REVENUE¹ ONGOING OPERATING PROFIT¹ 8% 9% R58 661 million R2 923 million EPS CORE EPS² INTERIM DIVIDEND 23% 8% 14% 679 cents 795 cents 320 cents PER SHARE PER SHARE
Slide 4: Overview
OVERVIEW > Results feature the latter stages of Imperial’s strategic, capital, operational, organisational & managerial restructuring > Imperial’s activities consolidated into two large, increasingly self-sufficient divisions: Imperial Logistics & Motus Corporation • ahead of original plans in many
Slide 5: Growth Trend in Foreign Operations
GROWTH TREND IN FOREIGN OPERATIONS REVENUE* (Rm) OPERATING PROFIT* (Rm) 4 year 4 year 25 271 1 206 25 040 CAGR= CAGR= 28% 28% 22 436 1 055 1 041 20 187 20 165 958 18 054 839 794 16 417 644 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017
Slide 6: Overview
OVERVIEW > Results feature the latter stages of Imperial’s strategic, capital, operational, organisational & managerial restructuring > Imperial’s activities consolidated into two large, increasingly self-sufficient divisions: Imperial Logistics & Motus Corporation • ahead of original plans in many
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= 9% 11% 25 295 23 892 22 860 1 357 1 344 1 342 21 806 21 558 21 334 20 005 1 195 1 188 1 179 1 062 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2
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 (59% revenue; 64% operating profit): uncontrollable factors in H1 > Strengthening of the Rand resulting in foreign exchange hedging losses & higher priced inventory > 13% decline in national new vehicle sales resulted in reduced demand & excess inven
Slide 10: Operating Context – Imperial Regions
OPERATING CONTEXT – IMPERIAL REGIONS Eurozone, UK & Australia (32% revenue; 20% operating profit): uncontrollable factors in H1 > Pro-longed low water levels depressed the profitability of inland shipping > Lower demand & pricing pressures from the steel, energy, commodities & construction sectors i
Slide 11: Agenda
AGENDA OPERATIONS FINANCIAL LOOKING OVERVIEW CONTEXT STRATEGY REVIEW REVIEW FORWARD 11
Slide 12: Path to Value Creation
PATH TO VALUE CREATION > Clarify the portfolio • What businesses are we in? What sectors do they occupy? What capital characteristics do they have? What capital characteristics do we want? • Disposals & acquisitions > Structure the portfolio • Sectoral grouping (i.e. similar skills / counterparties
Slide 13: Corporate Strategy
CORPORATE STRATEGY Imperial strives to create long term value for stakeholders through: > Strategic clarity (what business are we in; how do we compete and win; what is the strategic parenting role of Imperial group office) > Financial discipline (deep experience & expertise in finance, treasury & a
Slide 14: Capital Allocation Objective 1: Disposals
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 Disposals > Regent’s non-South African operations for an upfront payment of R697m, concluded in January 2017 > Minority
Slide 15: Capital Allocation Objective 1 (cont.)
CAPITAL ALLOCATION OBJECTIVE 1 (CONT.) Disposals in progress: > Non-strategic properties: R1.5bn is expected to be realised in the 2017 calendar year & a further R700m expected during 2018 > The sale of Regent’s South African business is still subject to regulatory approvals ● Disposals during 2017
Slide 16: 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 17: Capital Allocation Objective 3
CAPITAL ALLOCATION OBJECTIVE 3 We will invest capital in African Regions primarily to achieve our 2020 objective for the revenue & profits generated by logistics in that region to equal that of South African logistics & secondarily to expand our vehicles & related businesses in the region Acquisitio
Slide 18: 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 on 5th July 2016 > Palletways acquired 100% of Topco in Italy for
Slide 19: Capital Allocation Objective 5
CAPITAL ALLOCATION OBJECTIVE 5 The development & sustainability of Imperial will be underpinned by investment in human capital & information systems Organisation Effectiveness > Investing in enterprise architecture > Enhancing Executive Talent Management: objective assessment; ensuring relevant skil
Slide 20: Capital Allocation Objective 5 (cont.)
CAPITAL ALLOCATION OBJECTIVE 5 (CONT.) Information Systems > Major systems implementations: • Logistics Africa – SAP & other • Logistics International – Integration of SAP, TalentSoft, Global unified Transport Management System, Imperial Fleet Management System • Vehicle Import & Distribution – Deal
Slide 21: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 21
Slide 22: Imperial's Divisions
IMPERIAL’S DIVISIONS LOGISTICS MOTUS REGENT (discontinued) REVENUE* REVENUE* REVENUE 16% 3% unchanged R25.3 billion R35.0 billion R1.6 billion 42% contribution 58% contribution OPERATING PROFIT* OPERATING PROFIT* OPERATING PROFIT 12% 6% 10% R1.3 billion R1.6 billion R302 million 46% cont
Slide 23: Divisional Overview – Imperial Logistics
DIVISIONAL OVERVIEW – IMPERIAL LOGISTICS Imperial Logistics is focused on expanding & leveraging its footprint in selected African & European countries, with a bias towards less capital intensive businesses that enhance revenue growth & returns. Integrated logistics capabilities are also being stren
Slide 24: Divisional Overview – Motus
DIVISIONAL OVERVIEW – MOTUS The formation and structuring of Motus, under one collaborative leadership team, will enhance returns in the medium term by reducing duplication, complexity, costs & capital employed, unlocking intra-divisional efficiencies & more deeply penetrating the vehicle supply cha
Slide 25: Imperial's Divisions: Logistics
IMPERIAL’S DIVISIONS LOGISTICS REVENUE 16% R25.3 billion 42% contribution OPERATING PROFIT 12% R1.3 billion 46% contribution 4 YEAR CAGR 11% 25
Slide 26: Growth Trend Logistics South Africa
GROWTH TREND LOGISTICS SOUTH AFRICA REVENUE (Rm) OPERATING PROFIT (Rm) 4 year +10% 4 year +20% CAGR CAGR =+1% =0% 669 8 217 8 073 8 067 7 688 7 533 7 440 7 299 511 498 441 416 340 270 H1 2014 H2 2014 H1 2015 H2 2015 H1 H12016* 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 2015 H1 H12016* 2016 H2 2
Slide 27: Growth Trend Logistics African Regions
GROWTH TREND LOGISTICS AFRICAN REGIONS REVENUE (Rm) OPERATING PROFIT (Rm) 4 year -9% 4 year 0% CAGR CAGR = +26% = +42% 397 395 388 5 872 344 5 341 5 192 4 874 4 783 291 3 507 181 2 828 150 H1 2014 H2 2014 H1 2015 H2 2015 H1 H12016* 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 2015 H1 H12016* 2016
Slide 28: Growth Trend Logistics International
GROWTH TREND LOGISTICS INTERNATIONAL REVENUE (Rm) OPERATING PROFIT (Rm) 4 year +35% 4 year +16% CAGR CAGR =+9% =+7% 12 168 616 10 487 572 10 139 559 9 595 9 476 9 110 9 025 447 412 386 384 H1 2014 H2 2014 H1 2015 H2 2015 H1 H12016* 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 2015 H1 H12016* 2016
Slide 29: Logistics International (Euro)
LOGISTICS INTERNATIONAL (EURO) REVENUE (€m) OPERATING PROFIT (€m) OPERATING MARGINS (%) +32% +14% 4.3% 3.7% 795 602 29.3 25.7 H1 2016* H1 2017 H1 2016* H1 2017 H1 2016* H1 2017 > The performance in Rand terms was enhanced by a weaker average R/€ exchange rate > H1 2017 average R/€: 15.31 vs H1 2016
Slide 30: Imperial Logistics (Total)
IMPERIAL LOGISTICS (TOTAL) REVENUE* (Rm) OPERATING PROFIT* (Rm) 67% foreign 63% foreign 4 year 4 year CAGR CAGR =+9% =+11% 1 357 25 259 1 344 1 342 23 892 22 860 1 195 1 188 1 179 21 806 21 558 21 334 20 005 1 062 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 201
Slide 31: Imperial's Divisions: Motus
IMPERIAL’S DIVISIONS MOTUS REVENUE 3% R35.0 billion 58% contribution OPERATING PROFIT 6% R1.6 billion 54% contribution 4 YEAR CAGR -4% 31
Slide 32: National Vehicle Sales 2008 – 2016
NATIONAL VEHICLE SALES 2008 – 2016 IMPERIAL’S SHARE OF TOTAL NAAMSA VEHICLE SALES & GDP GROWTH 800 9% 623 644 631 639 599 588 600 38 29 31 31 6% 530 27 29 495 Vehicle units (thousands) 430 481 491 437 441 24 454 453 26 20 409 400 3% 312 341 GDP growth (%) 200 0% 155 99 80 97 117 120 119 117 106 0 (3
Slide 33: Imperial's Market Share vs OEMs
IMPERIAL’S MARKET SHARE VS OEMS MARKET SHARE* (%) 22.1% 20.6% 19.0% 18.9% 16.3% 15.5% 13.6% 12.4% 7.8% 7.4% 5.2% 5.0% Dec 15 Dec 16 Dec 15 Dec 16 Dec 15 Dec 16 Dec 15 Dec 16 Dec 15 Dec 16 Dec 15 Dec 16 Imperial Mercedes Ford Toyota Volkswagen Nissan Motus > Imperial’s total market share was maintain
Slide 34: Divisional Review: Vehicle Import & Distribution
DIVISIONAL REVIEW VEHICLE IMPORT & Performance > Revenue decline marginally due to lower volumes & DISTRIBUTION delays in new vehicle launches, partially offset by price increases, in challenging trading conditions > Operating profit improved by 2% resulting from: • solid performances from Hyundai &
Slide 35: Car Parc of Imperial Imported Brands
CAR PARC OF IMPERIAL IMPORTED BRANDS 1 154 990 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 H1 2017 > Car parc of approximately 1.2 million vehicles, continues to grow at a steady pace > The growing car parc provides an unde
Slide 36: 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 2014 2015 2016 Based to 100 Euro based cost (ind. 2012) Dollar based cost (ind. 2012) Selling price > 37% imports in USD > 63% imports in EUR 36
Slide 37: Divisional Review: Vehicle Retail & Rental
DIVISIONAL REVIEW VEHICLE RETAIL & RENTAL Performance > Revenue & operating profit increased by 2% assisted by price increases & an increase in pre-owned vehicle sales, partially offset by lower volumes > Eight dealerships were disposed of over the past 12 months > Passenger, LCVs & commercial vehic
Slide 38: Divisional Review: Aftermarket Parts
DIVISIONAL REVIEW AFTERMARKET PARTS Performance > Grew revenue & operating profit by 8% & 10% respectively, enhanced by: • parts sales & price increases; • change in the sales mix REVENUE OPERATING PROFIT 8% 10% R3.0 billion R173 million 38
Slide 39: Divisional Review: Motor Related Financial Services
DIVISIONAL REVIEW Performance MOTOR RELATED > Grew revenue & operating profit by 7% & 16% respectively, FINANCIAL SERVICES despite declining new vehicle sales > Higher profitability was experienced in demo sales & rental income due to higher business volumes > Profitability of the maintenance funds
Slide 40: Motus (Total)
MOTUS (TOTAL) REVENUE* (Rm) OPERATING PROFIT* (Rm) 4 year CAGR 23% foreign 4 year CAGR =+4% =-4% 13% foreign 35 015 34 878 34 105 2 031 33 672 32 741 31 477 30 803 1 747 1 691 1 643 1 568 1 566 1 481 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2
Slide 41: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 41
Slide 42: Income Statement
INCOME STATEMENT H1 2016 H1 2017 Rm Rm % CHANGE Revenue (including discontinued operations) 59 766 61 253 2 LOGISTICS 8% the Palletways acquisition in Logistics International & a solid performance from Logistics South Africa assisted growth; reduced by the weakening of the Naira & the Metical by 3
Slide 43: Income Statement
INCOME STATEMENT H1 2016 H1 2017 Rm Rm % CHANGE Revenue (including discontinued operations) 59 766 61 253 2 Operating profit (including discontinued operations) 3 066 3 181 4 Operating profit margin 5.1% 5.2% LOGISTICS 8% the Palletways acquisition & a weaker average Rand/Euro exchange enhanced th
Slide 44: Divisional Statistics
DIVISIONAL STATISTICS OPERATING MARGIN (%) 5.2% 5.1% 5.0% 5.0% 4.4% 4.4% Logistics Motus Group H1 2016 H1 2017 RETURN ON INVESTED CAPITAL (%) 13.1% 12.9% 12.6% 12.2% 11.5% 10.4% Logistics Motus Group H1 2016 H1 2017 WEIGHTED AVERAGE COST OF CAPITAL (%) 11.0% 10.3% 10.0% 9.5% 8.4% 8.0% Logistics Motu
Slide 45: Income Statement
INCOME STATEMENT Dec 2015 Dec 2016 Rm Rm % CHANGE Revenue 59 766 61 253 2 Operating profit 3 066 3 181 4 Amortisation of intangible assets (207) (263) Impairments of goodwill and other assets (303) Profit / (loss) on sale of businesses 447 (46) Foreign exchange gains / (loss) 126 (121) Re-measuremen
Slide 46: Income Statement
INCOME STATEMENT Dec 2015 Dec 2016 Rm Rm % CHANGE Profit before financing costs 3 068 2 719 (11) Net financing costs (651) (828) 27 Income from associates 58 47 (19) Profit before tax 2 475 1 938 (22) Tax (692) (586) (30) Net profit for the year 1 783 1 352 (24) Attributable to minorities 84 33 (61)
Slide 47: Financial Position
FINANCIAL POSITION Dec 2015 June 2016 Dec 2016 Rm Rm Rm % CHANGE Property, plant & equipment 11 736 11 465 9 997 (13) Transport fleet 6 372 5 953 5 887 Vehicles for hire 3 841 3 469 4 320 25 Goodwill & intangible assets 7 866 7 501 9 764 30 Associates, investments & loans 1 975 1 277 1 209 Other ass
Slide 48: Financial Position
FINANCIAL POSITION Dec 2015 June 2016 Dec 2016 Rm Rm Rm % CHANGE Total shareholders’ interest 21 191 19 802 19 270 (3) Net interest bearing borrowings (ignoring Regent cash) 17 709 16 079 20 682 29 Other liabilities 9 249 9 025 8 866 Liabilities directly associated with assets classified as 3 243 3
Slide 49: Cash Flow – Operating Activities
CASH FLOW – OPERATING ACTIVITIES Dec 2015 Dec 2016 Rm Rm % CHANGE Cash generated by operations 4 485 4 330 (3) Net working capital movements (1 194) (2 379) (excludes currency movements & net acquisitions) Interest & tax paid (1 641) (1 473) Cash flow from operating activities before rental assets c
Slide 50: Cash Flow Summary
CASH FLOW SUMMARY Dec 2015 Dec 2016 Rm Rm Cash flow from operating activities 89 (931) Investing activities: Net disposals / (acquisitions) of subsidiaries & businesses 726 (1 671) Capital expenditure – non-rental assets (1 501) (1 017) Net movement in associates & JVs (114) 542 Net movement in inve
Slide 51: Gearing
GEARING Net debt to equity > Higher net debt to fund: • acquisitions • capital expenditure 98% • working capital requirements > Net debt to equity at 98% was higher 79% than 73% at June 2016 & 76% at 76% 73% 66% December 2015 mainly due to the 60% 62% Palletways acquisition & working capital 51% 49%
Slide 52: Returns
RETURNS ROE (%) ROIC vs WACC (%)** 17.2 20 14.7 19 13.1 17 12.4 16 12.2 13 10.2 10.0 9.0 9.4 9.0 2013* 2014* 2015* 2016* H1 2017# 2013* 2014* 2015* 2016* H1 2017# ROIC WACC ROE affected by: ROIC affected by: > Attributable profits down 22% > Lower returns from reduced earnings > Partially offset by
Slide 53: Agenda
AGENDA OVERVIEW CONTEXT STRATEGY OPERATIONS FINANCIAL LOOKING REVIEW REVIEW FORWARD 53
Slide 54: Looking Forward
LOOKING FORWARD For the balance of F2017: > Conditions remain challenging but are not expected to deteriorate > We face pressure on revenue & margins, most particularly in our logistics operations beyond South Africa & in our Vehicle Import & Distribution business where fully priced inventory & out
Slide 55: Guidance
GUIDANCE Our outlook for divisional performance in F 2017 is as follows: > Imperial Logistics > Motus • South Africa: Growth of revenues & operating • Import & Distribution: Flat revenues & a decline in profit operating profit, impacted by challenging trading • African Regions: Decline in revenues &
Slide 56: Thank You
THANK YOU
Slide 57: Annexures
IMPERIAL , Fda ie TT
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: Palletways Overview
PALLETWAYS OVERVIEW > Acquisition of ~95% of Palletways concluded 5th July 2016 > Enterprise value consideration R3.0bn (£155m): • funded by existing unutilised foreign credit facilities > Leading European operator in express small consignment palletised freight market (#1 in UK, Italy & Iberia), wi
Slide 60: Divisional Review: Regent
DIVISIONAL REVIEW REGENT > Provides regulated life & short term insurance products & services mainly in South Africa (Held for sale) > Regent is currently held for sale, subject to regulatory approvals by the South African authorities > The disposal of the Regent Group’s non-South African operations
Slide 61: 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