Motus Holdings made its long-awaited debut in the specialty retailers sector of the JSE last week. This is a culmination of the unbundling of Imperial Holdings’ automotive business that has been on the cards for four years.
The unbundling and Motus’s separate listing was a logical move because Motus and Imperial Logistics had grown into large, self-sufficient and multinational companies that could deliver more value for their shareholders if they were separated.
Most importantly, separating the two companies reduced complexity, duplication and costs. There were no operational synergies between Imperial Logistics and Motus.
In preparation for the unbundling, Motus and Imperial Logistics were managed and reported on separately. Each company had its own CEO, board of directors and executive committee.
Imperial Logistics CEO-designate Mohammed Akoojee says the preparatory work before the unbundling made the transition smooth.
Business Day asked him about Imperial Logistics’s strategic plans now that the unbundling was complete.
We are very excited about our strategy, which has clear financial targets which we must deliver. This strategy will allow us to unlock a lot of value.
The strategy encompasses our three regions — SA, the rest of Africa, and international. In SA we have scale, size and capabilities to take advantage of outsourcing opportunities. There are not a lot of acquisition opportunities in SA at the moment. So, we will take advantage of the outsourcing trend. We are targeting growth of two times GDP plus inflation organically. We want to achieve this in three to four years.
How is your business coping in a low economic growth environment in SA?
The environment in SA has been tough. It has been difficult to operate in SA.
(In the year ended June 30, Imperial Logistics said its South African business’ performance took strain from lower volumes and depressed margins. It said the challenging market conditions and a competitive trading environment resulted in contract renewals at lower margins.)
But this has been a plus for us. We have rationalised. We have taken out some costs. This has forced us to be efficient and lean. The South African economy will turn. It is not a question of if but a matter of when. When the economy recovers we will be well-placed to take advantage of the opportunities.
We did not sit and wait for the economy to recover. It will be naïve to think that things will change overnight. It is going to take time. The message from the government is clear. The government wants the economy to recover. We must be ready for that.
What are your plans in the rest of Africa?
Growth in the rest of Africa will come from pharmaceuticals and consumer packaged goods. We offer a route-to-market solution for multinationals (such as GlaxoSmithKline Pharmaceuticals). We have presence in 14 African countries. We are the largest pharmaceuticals distributor in Nigeria.
As far as fast-moving consumer goods are concerned, our network is still predominantly in SA. We want to extend that to East and West Africa.
We are excited about the prospects in the rest of Africa. We are targeting to grow in low double digits organically, which is 10% to 12%. On top of that, we are still likely to do acquisitions.
Remember, 10 years ago we had no business outside SA.
What about the international business?
We would like to add international freight management capability to that business. If you look at Imperial Logistics, it is the 25th largest logistics company in the world. The biggest difference between Imperial Logistics and tier-one companies is that they have freight businesses.
If we add freight management, we will be able to provide end-to-end offering to our clients. At the moment that is the value we are leaving on the table.
We are looking to add this capability through acquisitions. We will look at smaller [freight] companies. The strategy is to buy niche players.
(Imperial Logistics is ranked in the top 25 global third-party logistics providers, according to Armstrong & Associates, the US-based supply-chain consulting firm).
What is your message to shareholders now that the unbundling has been finalised?
The two businesses will perform better now that they have been separated. I think they will be able to deliver on their respective strategies. The unbundling reduced complexity, duplication and costs.
Do you think the two businesses are undervalued?
If you look at the valuation of the logistics and automotive businesses, they traded at a discount. So shareholders can expect better performance and re-rating in the stocks.
Do you intend to maintain the current dividend policy?
Yes. We will continue to pay a dividend payout ratio of abut 45% of headline earnings per share. We can maintain the dividend policy and still do acquisitions.
(In the year ended June 30, Imperial Logistics’s operating profit was R2.9% and accounted for 44% of Imperial Group’s total operating profit).