Imperial Logistics — FY2019 Earnings Presentation
48 slides from Imperial Logistics's earnings presentation, Jun 30, 2019
Slide 1: Investment community presentation
Investment community presentation Results for the 12 months ended 30 June 2019
Slide 2: Agenda
Agenda Overview Operating context Operations review Financial review Strategy Looking forward 2
Slide 3: Overview
Imperial’ logistics Overview
Slide 4: Key features
Key features Continuing revenue* Continuing operating profit* Continuing operating profit +6% -9% -1% R49.7 billion R2.5 billion excluding once-off costs Continuing HEPS Free cash inflow Final dividend (continuing) -7% R1,4 billion 109 cps 542 cents per share Improved from R1,3 billion in June 2018
Slide 5: Overview
Overview • An unsatisfactory operating performance compounded by challenging trading conditions & significant once-off costs › Logistics African Regions - performed well supported by excellent results from healthcare & good performance from consumer › Logistics South Africa - results negatively impa
Slide 6: Overview
Overview • Exit of CPG business in South Africa due to unviable & uncompetitive business model › impairment of assets including goodwill of c. R590 million & provisions for closure costs of c. R850 million post-tax › CPG classified as a discontinued operation › we will consider the interests of our
Slide 7: Operating context
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Slide 8: Operating context
Operating context South Africa (27% group revenue; 38% group operating profit) • Persistently poor economic conditions translated into exceptionally low volumes across most sectors • Continued margin pressures from clients - particularly in consumer-facing, healthcare & manufacturing Rest of Africa
Slide 9: Operating context
Operating context Eurozone & United Kingdom (49% group revenue; 31% group operating profit) • Steel, manufacturing & automotive sectors remain under pressure • Heightened risk of recession in Germany • Low unemployment: › scarcity of highly skilled people › higher wage growth • Shipping operations n
Slide 10: Operations review
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Slide 11: Divisional overview
Divisional overview South Africa African Regions International • Leading end-to-end capabilities to provide • Leading distributor of pharmaceuticals & • Transportation management (shipping / road) outsourced services to extensive client base consumer goods in Southern, East & West Africa • Leading c
Slide 12: Growth trend: Logistics South Africa
Growth trend: Logistics South Africa Revenue Operating profit 4 year 4 year R million R million CAGR= CAGR= -4% +2% +2% 0% 987 950 879 902 13 338 13 376 13 374 828 12 413 11 375 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19 Excluding CPG, operating profit grew 5% p.a. over th
Slide 13: Growth trend: Logistics African Regions
Growth trend: Logistics African Regions Revenue Operating profit 4 year 4 year R million R million CAGR= +16% CAGR= +5% +6% 12 105 +8% 11 016 10 461 9 974 773 787 8 647 726 702 632 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19 Delivered a good performance, increasing revenue
Slide 14: Growth trend: Logistics International (Euro)
Growth trend: Logistics International (Euro) Revenue Operating profit Operating margins 4 year 4 year € million 0% € million % CAGR= CAGR= 5.0% 4.9% 4.6% 4.7% +2% -9% 1 513 1 517 1 458 71.0 1 391 70.0 1 298 67.0 63.0 -32% 3.2% 48.0 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19 Jun 15 Jun 16 Jun 17 Jun 18 Jun 1
Slide 15: Growth trend: Logistics International (Rands)
Growth trend: Logistics International (Rands) Revenue Operating profit 4 year 4 year R million R million CAGR= +6% CAGR= +7% -5% 24 540 1 084 23 200 1 000 972 -29% 21 517 958 19 071 19 512 775 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19 Revenue in Rands increased by 6% & op
Slide 16: Divisional statistics
Divisional statistics Operating margin Return on invested capital Weighted average cost of capital % % % 7.4% 7.1% 6.9% 15.4% 6.5% 17.5% 5.9% 16.2% 5.0% 13.8% 11.0% 10.8% 11.1% 4.7% 13.0% 10.2% 12.2% 10.4% 8.5% 9.6% 7.6% 3.2% 6.3% 7.1% South Africa African International Group South Africa African In
Slide 17: Financial review
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Slide 18: Profit & Loss (continuing operations)
Profit & Loss (continuing operations) Jun 2019 Jun 2018 * Rm Rm % Change Revenue 49 720 48 565 2 Operating profit (note 1) 2 501 2 868 (13) Amortisation of intangible assets arising on business combinations (400) (415) (4) Profit on disposal of properties, net of impairments (6) 22 >100 Impairments
Slide 19: Profit & Loss (continuing operations)
Profit & Loss (continuing operations) Jun 2019 Jun 2018* Rm Rm % Change Net financing costs (note 1) (415) (569) (27) Income from associates (note 2) 46 56 (18) Tax (note 3) (471) (620) (24) Net profit for the year – continuing operations 90 1 179 (92) Discontinued operations (note 4) 3 493 2 229 57
Slide 20: Financial position
Financial position Jun 2019 Jun 2018* Rm Rm % Change Property, plant & equipment 2 647 2 874 (8) Transport fleet (note 1) 5 452 5 201 5 Goodwill & intangible assets (note 2) 6 719 8 300 (19) Investments in associates, other investments & other financial assets (note 3) 703 957 (27) Net working capit
Slide 21: Financial position
Financial position Jun 2019 Jun 2018* Rm Rm % Change Net interest bearing borrowings (note 1) (5 766) (5 721) 1 Other liabilities (2 418) (2 405) 1 Other assets 563 12 038 Total equity (note 2) 8 647 23 125 (63) 1. Decreased marginally, impacted by: › dividends paid R792 million › total capital expe
Slide 22: Cash flow operating activities (total Logistics, excluding Motus)
Cash flow operating activities (total Logistics, excluding Motus) Jun 2019 Rm Cash generated by operations (before interest & taxes paid) 3 239 Net working capital movements (excludes currency movements & net acquisitions) (note 1) (16) Net Interest & tax paid (1 158) Cash inflow from operating acti
Slide 23: Cash flow summary (total Logistics, excluding Motus)
Cash flow summary (total Logistics, excluding Motus) Jun 2019 Rm Cash flow from operating activities 2 065 Investing activities: (1 008) Net (acquisitions) disposals of subsidiaries & businesses (25) Capital expenditure (1) (1 094) Net movement in associates, investments, loans & other financial ins
Slide 24: Leverage
Leverage Net debt to EBITDA 2.6 • The Group’s liquidity position is strong 9 971 • R11,8 billion of unutilised banking 1.5 1.6 1.6 facilities 5 721 6 230 5 766 • 89% of the Group debt is long-term in nature • 55% of the debt is at fixed rates • All debt requirements are accommodated in the banking H
Slide 25: Performance against medium term guidance
Performance against medium term guidance F2019 results Medium term guidance over 3 years 6% revenue growth rate ILSA & ILI¹: 2x GDP growth + inflation Revenue & operating profit 9% decline in operating profit ILAR¹: Low double digit growth Cash conversion 72% Targeted cash conversion of 70-75% Debt
Slide 26: IFRS 16 impact on 2018
IFRS 16 impact on 2018 Total Profit or loss (Rm) operations South Africa African regions International EBITDA 1 602 522 100 980 Depreciation (1 344) (421) (78) (845) Operating profit 258 101 22 135 Interest (310) (144) (35) (131) Profit before tax (52) (43) (13) 4 Financial position Total assets 5 3
Slide 27: Strategy
Imperial’ Strategy
Slide 28: Our path since unbundling
Our path since unbundling The strategic rationale for the unbundling was to achieve the following: • Imperial Logistics would be a focused business • Deliver a clear, coherent strategy • Effectively capitalised to deliver on a clearly defined growth path • Unlock value for shareholders Since the unb
Slide 29: Simplifying our strategic positioning
Simplifying our strategic positioning Core strategic focus: • Leveraging competitive advantages through growing & expanding African Regions • Strategically aligning the International portfolio • Leveraging capabilities - mainly in healthcare, consumer, chemicals, industrial & automotive - in other e
Slide 30: Key strategic priorities
Key strategic priorities Short-term objectives: 1. Continue to grow in Africa, adding new capabilities, entering new industry verticals & serving more countries / regions 2. Strategically align our International portfolio with our core competitive advantage, being Africa Objectives to be executed in
Slide 31: Key management priorities & strategic progress
Key management priorities & strategic progress Intensified efforts to further rationalise, reduce costs & restructure the business: benefits will be fully realised from F2020 • Exiting the CPG business in South Africa • Rationalisation of South African (excluding CPG) & International divisions resul
Slide 32: Key management priorities & strategic progress
Key management priorities & strategic progress Strengthening commercial & innovative mindset to accelerate strategic delivery • Appointed highly experienced industry experts as chief commercial officers in South Africa & International & global heads for each target industry • Established an innovati
Slide 33: Looking forward
Imperial’ Looking forward
Slide 34: Looking forward
Looking forward • From F2020 we will realise tangible bottom-line benefits of new contract gains, portfolio restructuring, new acquisitions, exit of non-core & unprofitable businesses, & cost cutting initiatives in all divisions • As a result: for the financial year to 30 June 2020, subject to stabl
Slide 35: Annexures
Imperial’ logistics Annexures
Slide 36: Leading market positions in South Africa, selected industries in African Regions & Europe
Leading market positions in South Africa, selected industries in African Regions & certain specialised capabilities in Europe International Revenue by industry • Established international contract logistics with specialised capabilities & South Africa African Regions International leading positions
Slide 37: 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 Air & ocean; Informal retail 5b sourcing & procurement 6b Retail services demand Packaging 1
Slide 38: African Regions footprint
African Regions footprint Netherlands UK Poland Belgium Germany 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 Fas
Slide 39: Strategic priorities
Strategic priorities 1. Continue to grow in Africa - adding new capabilities, entering new industry verticals, serving more countries / regions • The strategic initiatives that will support our objectives to position Imperial Logistics as a strategic partner, providing a ‘gateway to Africa’ to compa
Slide 40: Strategic priorities
Strategic priorities 2. Expand our distributor capability geographically & add other existing & new capabilities to the distributor network over time which will create cross-selling & up-selling opportunities • Obtain local experience, preference for acquisitions rather than greenfields or brownfiel
Slide 41: Strategic priorities
Strategic priorities 3. Invest in capabilities in select new emerging & developed markets; support the growth of target industry verticals in Africa - healthcare, consumer, chemicals, industrial, automotive • Develop specialised contract logistics & freight management capabilities that provide legit
Slide 42: Strategic priorities
Strategic priorities 3a. Industry vertical approach: our key differentiators Our current positioning is focused on the following industry verticals to deliver client-centric solutions, build credibility among clients & prove industry expertise, which leverages our capabilities across regions • Healt
Slide 43: Strategic priorities
Strategic priorities • Chemicals (c.17% group revenue; multiple regions) › differentiated by our specialised capabilities to handle, move & store hazardous products through integrated contract logistics & freight management › enabling our clients to maximise conformance whilst minimising process dup
Slide 44: Strategic priorities
Strategic priorities 4. Acquire, partner and/or build air & ocean IFM capability as a basis for global coverage to support in & out of Africa flows in air & ocean solutions • Basis for global coverage to support in & out of Africa flows in air & ocean solutions • Acquire existing global IFM network
Slide 45: Divisional progress against strategy
Divisional progress against strategy South Africa African Regions International • Deliver organic growth, leveraging asset • Expand multi-market aggregation (MMA) • Align portfolio to group strategic positioning Regional initiatives flexibility model & competencies • Reorganise operating model by ta
Slide 46: Simplifying disclosure
Simplifying disclosure Secondary segmental disclosure provided in FY 2019 results is categorised according to our capabilities below: 1. Freight management (c. 50% group revenue; 54% group operating profit) › the movement of goods between specified sources & destinations › using different transporta
Slide 47: Secondary segmental disclosure: capabilities per region
Secondary segmental disclosure: capabilities per region Head Office & PROFIT or LOSS Freight Management Contract Logistics Distributorship Eliminations Businesses held for sale Total Logistics Rm 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Revenue 24 877 22 997 14 603 15 041 10 539 8
Slide 48: 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