Group chief financial officer's review

George de Beer – Group chief financial officer

Bold decisions with
tangible benefits

Continuing net debt: EBITDA
1,6 times
for the 12-month period		   ROIC
of 10,4%
against WACC of 10,2%

My first months as CFO of the group since the unbundling of Motus in November 2018 have involved difficult and bold decisions, amplified focus and refinement of our financial control environment throughout the business. We are ensuring that strong financial positions and cash flow management is maintained in all three divisions, and that our financial processes and capital allocations are aligned to the group's strategic priorities. Tough times call for swift and decisive action, and we have spent a significant amount of time assessing the performance and evaluating the relevance of existing businesses and have made difficult decisions to exit those that are underperforming, low return on effort and non-core to our strategy.

Bold decisions with tangible benefits

Further strategic rationalisation of the portfolio and restructuring post the Motus unbundling resulted in the following decisive actions taken – the tangible benefits of which will be realised from the 2020 financial year:

  • The decision to exit the CPG business in South Africa due to an unviable and uncompetitive business model, which resulted in an impairment of assets including goodwill of c.R590 million and provisions for closure costs of c.R850 million post-tax. CPG is classified as a discontinued operation for the financial year ended 30 June 2019.
  • Significant removal of fixed overhead costs in the South African (excluding CPG) and International divisions from F2020 of c.R385 million pa, with an associated once-off cost impact in F2019 of c.R170 million.

Unsatisfactory operational results in challenging market conditions

Difficult trading conditions persisted across the group, particularly in our South African and European operations, resulting in an unsatisfactory operating performance for the group. Revenue from continuing operations grew by 6% while continuing operating profit and HEPS declined by 9% and 7% respectively. Results were supported by a good performance from African Regions, offset by weaker operational performances, certain once-off trading costs of c.€4 million (around R65 million) in International, and the once-off costs associated with our business rationalisation and restructuring in our South African and International operations of c.R170 million. Excluding the once-off costs, operating profit for continuing operations decreased by 1%. Furthermore, Imperial Logistics' contract renewal rate across our divisions on existing contracts is in excess of 90%, with an encouraging pipeline of new opportunities and supported by an excellent new contract gain rate. New business revenue of approximately R5,6 billion was secured during the past year, which is a reflection that despite the challenging trading conditions, we still remain relevant and significant to our clients.

Key features of our 2019 financial year include:

  • Continuing revenue* up 6% to R49,7 billion.
  • Continuing operating profit* down 9% to R2,5 billion.
  • Excluding once-off costs, operating profit down 1%.
  • Continuing HEPS down 7% to 542 cents per share.
  • Continuing EPS loss of 26 cents per share.
  • Free cash inflow# (post-maintenance capex) of R1,4 billion (2018: R1,3 billion).
  • Free cash conversion of 72% (2018: 87%).
  • Continuing net debt:EBITDA of 1,6 times for the 12-month period (2018: 1,5 times net debt:EBITDA).
  • ROIC of 10,4% against WACC of 10,2% (2018: ROIC of 12,2% against WACC of 8,5%).

* Excluding discontinued operations and businesses held for sale.

# Includes CPG and excludes Motus.

Note: ROIC and WACC are calculated on a rolling 12-month basis.

Strong financial position, cash flow and dividend maintained

I would like to emphasise that despite disappointing operational results in F2019, our balance sheet management remains sound with sufficient headroom in terms of capacity and we still generated good cash flows. These financial metrics, we believe, are key in determining the financial health of a business and the teams have worked hard in ensuring that these metrics were managed meticulously and achieved in line with our expectations throughout the year, despite significant changes and challenges that the business faced. Furthermore, we continued to pay a healthy dividend of 45% of continuing HEPS to our shareholders.

  • Net working capital for continuing operations of R1 833 million improved by 3% (excluding CPG provisions for closure) compared to R1 881 million in June 2018, and was better than expected as the growth rate in working capital was lower than the growth in revenue.
  • Net capital expenditure of R1,1 billion was in line with depreciation and increased from R517 million in F2018 and benefited from property disposals (R260 million).
  • Total net debt increased marginally by 1% compared to June 2018.
  • A final cash dividend of 109 cents per ordinary share has been declared, bringing the F2019 dividend to 244 cents per ordinary share (45% of continuing HEPS).

Impairment of certain historic goodwill

The impairment of certain historic goodwill to the value of c.R1,1 billion (c.14% of total goodwill and intangible assets; excluding CPG) was driven by significant deterioration in macroeconomic conditions in all three divisions, which include a depressed growth outlook, uncertainty and higher WACC rates in certain territories. It is important to note that these factors have resulted in the reduction in the value in use of certain of our cash-generating units in the financial year, leading to the goodwill impairment. The affected businesses, however, are still cash generative and profitable. The remaining goodwill consists mainly of operations which are in growing markets and industries, are cash flow generating with low capital requirements, and which exceed targeted hurdle rates (including Eco Health, Surgipharm, Imres and Palletways).

Summary of financial results for the 12 months ended 30 June 2019

Group profit or loss (extracts)
Rm  June 
2019 		 June   
2018~		    % 
change 		   
CONTINUING OPERATIONS    
Revenue  49 720  48 565     2    
EBITDA  3 556  3 883    
Depreciation, amortisation, impairments and recoupments  (1 055) (1 015)         
Operating profit  2 501  2 868     (13)   
Margin %  5,0  5,9          
Recoupments from sale of properties, net of impairments  (6) 22    
Amortisation of intangible assets arising on business combinations  (400) (415)   
Foreign exchange losses  (53) (50)   
Remeasurement of put option and contingent consideration liabilities  51  73    
Business acquisition cost  (15) (11)   
Net finance cost  (415) (569)    (27)   
Share of results of associates and joint ventures  46  56          
PBT (before exceptionals) 1 709  1 974     (13)   
Goodwill impairments  (1 139) (26)   
Profit (loss) on sale of businesses  64  (149)   
Impairment of investments in associates and loans advanced  (73)            
Profit before tax  561  1 799    
Income tax expense  (471) (620)         
Profit for the year from continuing operations  90  1 179     (92)   
DISCONTINUED OPERATIONS  3 493  2 229     57    
Consumer packaged goods (CPG) (1 899) (83)   
Motus Holdings Limited  5 392  2 312          
Net profit for the year  3 583  3 408          
Net profit attributable to:    
Owners of Imperial  3 441  3 273          
– Continuing operations  (51) 1 011    
– Discontinued operations  3 492  2 262          
Non-controlling interest  142  135          
– Continuing operations  141  168    
– Discontinued operations  1  (33)         

~ Restated for discontinued operations (CPG).

Group financial performance

Operating profit from continuing operations, including businesses held for sale, decreased by 13%, negatively impacted by weaker trading performances and once-off effects relating to the significant business rationalisation and restructuring in the South African and International divisions, as well as the impact of WLTP on Logistics International.

The R265 million decrease in profit before tax to R1,7 billion (before exceptional items) is mostly attributable to the decrease in operating profit of 13% which was partly offset by a decrease in net finance costs of R154 million. The decrease in net finance cost was aided by the once-off gain of R63 million on the settlement of the preference shares and lower average debt levels that resulted from the capitalisation of Logistics prior to the unbundling of Motus.

The profit on sale of businesses of R64 million related to the sale of an associate Gruber in Logistics International.

Following the introduction of the RTGS currency, hyperinflationary indicators and uncertainty surrounding the availability of foreign exchange in Zimbabwe, the group impaired its investments in its businesses by R59 million to nil.

Significant contributors to the lower effective tax rate were the non-taxable gains of R63 million on the redemption of the preference shares and the favourable remeasurement of put option liabilities of R51 million.

The profit from discontinued operations comprises Motus offset by the loss for the year in the CPG business.

The decrease in non-controlling interests mainly resulted from the increase in the share of losses by minorities in Pharmed.

Reconciliation of continuing earnings to continuing headline earnings

Cents June 
2019 		 June 
2018 		    % 
change 		   
BASIC EARNING PER SHARE
Earnings per share  1 775  1 681     6    
Imperial Logistics  (1 006) 477    
Continuing operations  (26) 519          
Discontinued operations (CPG) (980) (42)         
Motus  2 781  1 204     131    
Headline earnings per share  416  1 570     (74)   
Imperial Logistics  (127) 543    
Continuing operations  542  585     (7)   
Discontinued operations (CPG) (669) (42)         
Motus  543  1 027     (47)   

Financial position

Rm June 
2019 		 June   
2018~		    % 
change 		   
Goodwill and intangible assets  6 719  8 300     (19)   
Investment in associates and joint ventures  520  752     (31)   
Property, plant and equipment  2 647  2 874     (8)   
Transport fleet  5 452  5 201     5    
Investments and other financial assets  183  205     (11)   
Net working capital#  747  1 881     60    
Assets of disposal groups  296  669          
Retirement benefit obligation  (1 343) (1 216)    10    
Net debt  (5 766) (5 721)    (1)   
Other financial liabilities  (1 075) (1 189)    (10)   
Net current tax assets (liabilities) 267  (269)         
Net assets held for distribution to owners of Imperial     11 683          
Liabilities of disposal groups     (45)         
Total equity  8 647  23 125     (63)   
Total assets  31 265  70 503     (56)   
Total liabilities  (22 618) (47 378)    (52)   
Net debt:equity %  66,7  50,0          
Return on invested capital (ROIC)* (%) 10,4  12,2          
Weighted average cost of capital (WACC)* (%) 10,2  8,5          
Margin above WACC* (%) 0,2  3,7          
~ For ease of comparability, CPG’s assets and liabilities are reclassified to held for sale in the comparative periods. The group’s statutory accounts will not be restated.
* Including businesses held for sale and excluding CPG as discontinued.
# Net working capital in the current period includes the net working capital related to CPG amounting to negative R1 086 million that will be recovered or settled through the ordinary course of business and not through sale.

Goodwill and intangible assets decreased 19% as a result of goodwill impairments of R1,1 billion and the amortisation of intangibles of R400 million.

Investment in associates and joint ventures declined mainly due to the disposal of Gruber and the impairment of the investments and loans advanced to the Zimbabwean business.

Property, plant and equipment, combined with the transport fleet, increased as a result of investment in the fleet to accommodate new contract gains and fleet replacement in the South Africa and International divisions, offset by depreciation.

Other financial liabilities decreased resulting mainly from the repayment of a non-controlling loan in Surgipharm and a decrease in put option liabilities due to favourable remeasurement. Net income tax liabilities increased as a result of the deconsolidation of tax assets of the remaining Imperial Group entities due to the unbundling of Motus.

Movement in total equity for the year to 30 June 2019

Total equity of R8 647 million decreased by R14 478 million largely due to ordinary dividends paid of R1 030 million and the special distribution in specie of Motus of R17 billion. The dividend outflows were offset by comprehensive income of R3 890 million including R200 million received from Afropulse in relation to the B-BBEE transaction.

The following details the changes in equity during the year:

Rm June 
2019 		  
Comprehensive income  3 890    
Net profit attributable to Imperial shareholders  3 441    
Net profit attributable to non-controlling interests  142    
Increase in the foreign currency translation reserve  211    
Increase in the hedge accounting reserve  170    
Revaluation of retirement benefit obligation, net of tax  (74)   
Movement in share-based reserve net of transfers to retained earnings  32    
Ordinary dividend paid  (1 030)   
Unbundling dividend  (17 036)   
Repurchase of Imperial Logistics shares  (262)   
Non-controlling interest acquired, net of disposals and shares issued  28    
Net decrease in non-controlling interests through buyout  97    
Non-controlling share of dividends  (197)   
Total decrease  (14 478)   

Cash flow (excluding Motus and including CPG)

Rm June 
2019 		  
Cash flows from operating activities       
Cash generated by operations before movements in net working capital  3 239    
Movements in net working capital  (16)   
Cash generated by operations before interest and taxes paid  3 223    
Net interest paid  (578)   
Tax paid  (580)   
Cash generated by operations   2 065    
Cash flows from investing activities       
Net acquisition of businesses  (25)   
Expansion capital  (471)   
Net replacement capital expenditure  (623)   
Net cash movement in other associates and joint ventures  286    
Net cash movement in investments, loans and non-current financial instruments  (175)   
Cash utilised in investing activities  (1 008)   
Cash flows from financing activities       
Hedge cost premium paid  (161)   
Settlement of interest rate swaps  (13)   
Repurchase of ordinary shares  (262)   
Net dividends paid  (792)   
Change in non-controlling interests  (137)   
Capital raised from non-controlling interests  200    
Settlement of non-redeemable, non-participating preference shares  63    
Cash utilised in financing activities  (1 102)   
Movement in net debt before currency adjustments  (45)   
Free cash flow (including CPG and excluding Motus) 1 442    

Note: Comparatives for 2018 have not been included in the above table. The statutory cash flow statement is included in the detailed financials available here.

Excluding Motus, cash generated by operations of R2,1 billion increased by 46% (2018: R1,4 billion). Net working capital was well managed, resulting in a net cash outflow of only R16 million while net capital expenditure increased to R1,1 billion from R517 million in F2018 mainly due to higher investment in fleet expansion to support new contract gains and fleet replacement in Logistics South Africa, and specialised new fleet acquired in Logistics International. Furthermore, the prior period benefited from property disposals of R260 million.

Interest of R578 million and tax of R580 million were paid during the year and dividends amounted to R792 million during the year.

Other significant cash flow items included the settlement of the preference shares which resulted in a cash outflow of R378 million and ordinary share buy-backs of R262 million and R200 million that was raised from the Afropulse B-BBEE transaction and proceeds of R226 million from the sale of Gruber.

Free cash flow, post-maintenance capex and including CPG, increased to R1,4 billion from R1,3 billion in F2018 resulting in continuing free cash flow to continuing headline earnings ratio of 1,40 times.

Liquidity

The group's liquidity position is strong, with R11,8 billion of unutilised banking facilities. In total, 89% of the group debt is long term in nature and 55% of the debt is at fixed rates.

Dividend

A final cash dividend of 109 cents per ordinary share has been declared, bringing the F2019 dividend to 244 cents per ordinary share. The dividend is in line with our targeted pay-out ratio of 45% of continuing HEPS, subject to prevailing circumstances.

Discontinued operations

  • Motus

    The results of Motus have been consolidated up to 31 October 2018. On 22 November 2018 Imperial fair valued its interest in Motus at R17 058 million and distributed this value to its shareholders. The revaluation resulted in a post-tax gain of R4 339 million that, together with Motus' trading results to 31 October 2018, is included in profit or loss under discontinued operations.

  • Consumer packaged goods in South Africa

    CPG has been classified as a discontinued operation following the announcement on 3 June 2019 to exit the business due to the multi-principal warehouse distribution model becoming unviable and uncompetitive.

Acquisitions and disposals

There were no material acquisitions or disposals concluded in the period under review. Two transactions in African Regions are nearing finalisation, pending the relevant regulatory approvals:

Geka Pharma (Namibia)

Imperial Logistics is acquiring a 65% stake in Geka Pharma, a distributor of pharmaceutical, medical, surgical and allied products in Namibia for approximately R80 million, subject to competition commission approval. This transaction is in line with Imperial Logistics' strategy to expand into new verticals in existing markets of operation. The acquisition will create a footprint for Imperial Logistics in the healthcare industry in Namibia.

MDS Logistics (Nigeria)

Imperial Logistics is acquiring a further 8% equity stake in MDS Logistics, Nigeria's leading provider of integrated supply chain solutions. The transaction will include Imperial Logistics transferring some existing profitable contracts to MDS Logistics, and paying a further USD2,4 million, subject to approval from regulatory authorities. The equity value of MDS in this transaction was c.USD40 million. This transaction will take our shareholding in the business from 49% to 57%. Securing majority control in MDS Logistics will drive integration with Imperial Logistics' operations in Nigeria, facilitating the implementation of Imperial Logistics' value-added logistics offering through an end-to-end solution including transport, warehousing, distribution and distributorships, and as such leveraging our capabilities in this market.

Capital allocation approach prioritises investment in strategic businesses

Our acquisitive growth strategy and capital allocation prioritises investment in strategically aligned businesses with strong organic growth and cash flow profiles that enhance our key competitive advantages and meet our financial hurdle rates.

Re-iterating our commitment to transformation and B-BBEE

Significant progress has been made in accelerating transformation and ensuring that we remain relevant to the needs of our clients in South Africa in terms of B-BBEE, which we approach from both a moral and commercial perspective. As highlighted elsewhere in this report, we are pleased with the B-BBEE transaction concluded with the Afropulse Group – a wholly black women-owned business – to form Imperial Logistics Advance, in December 2018. Imperial Logistics Advance is accordingly a 51% black-owned and more than 30% black women-owned enterprise, focusing on the energy, mining and chemicals industries. Afropulse acquired 25% of Imperial Logistics Advance for R200 million. Furthermore, our 2019 B-BBEE scorecard is expected to achieve a Level 3 rating against the dti Codes and a Level 2 rating against the Road Freight Sector Codes. As a responsible corporate citizen, we will continue to ensure that we record ongoing progress on this front to enhance our relevant and competitiveness.

Outlook

From the 2020 financial year we will realise tangible bottom-line benefits of new contract gains, new acquisitions, restructuring, exit of non-core and unprofitable businesses, and reducing costs significantly in all our businesses. As a result, for the financial year to 30 June 2020, subject to stable currencies and economies in which we operate, we expect Imperial Logistics' continuing operations (excluding businesses held for sale) to deliver:

  • High single digit revenue growth compared to F2019.
  • Low double digit operating profit growth compared to F2019.
  • Low double-digit growth in continuing HEPS compared to F2019.
  • Ongoing strong free cash flow conversion of c.70%.

Beyond F2020, our medium-term guidance over the next three years includes:

  • Returns: ROIC of WACC + 3% for the group.
  • Revenue and operating profit growth (organic)
    • South Africa: 2 times GDP plus inflation
    • African Regions: low double digits
    • International: 2 times GDP plus inflation
  • Free cash flow conversion: 70 – 75%.
  • Gearing: net debt to EBITDA of <2,5 times through the cycle.
  • Debt capacity: R3 billion to R5 billion (excluding cash from future disposals).
  • Dividends: c.45% of continuing HEPS.

As mentioned at the outset, the financial position of Imperial Logistics remains strong, with sufficient headroom in terms of capacity and liquidity to facilitate our growth aspirations and the above targets. A strong focus on careful capital allocation, and debt, working capital, capex and forex risk management will continue and we remain positive that we will reap the benefits of the significant and strategic decisions taken going forward.

George de Beer

Group chief financial officer

Five-year review

 

      Continuing operations Total operations  
Total operations Financial
definitions		   2019 
Rm 		 2018 
Rm 		 2017 
Rm 		   2016 
Rm 		   2015 
Rm 		  
PROFIT OR LOSS
Revenue 		 49 720  48 565  118 567     118 849     110 487    
Operating profit 		 2 501  2 868  6 538     6 382     6 235    
Net financing costs 		 (415) (569) (1 680)    (1 440)    (1 194)   
Share of results of associates and joint ventures 		 46  56  103     138     32    
Income tax expense 		 (471) (620) (1 060)    (1 221)    (1 213)   
Tax rate (%)		 91,5  35,6  30,1     28,6     26,6    
Net profit (loss) attributable to non-controlling interest 		 141  168  (36)    184     332    
Headline earnings 		 1 051  1 139  2 700     2 994     3 135    
CASH FLOWS 
Cash generated by operations (before capital expenditure on rental assets, net financing costs and tax paid)		 3 656  3 336  9 076     8 143     9 058    
Cash flow from investing activities (including capital expenditure on rental assets)		 (918) 960  (3 648)    (3 199)    (6 482)   
Net debt repaid (raised)		 68  1 472  437     (1 657)    (1 902)   
Free cash flow 		 1     1 989  1 420  4 296     2 536     4 573    
ASSETS AND LIABILITIES* 
Total assets 		 30 969  33 866  68 853     69 835     65 712    
Operating assets 		 2     27 807  29 483  61 025     58 783     56 944    
Operating liabilities 		 3     13 195  11 497  26 000     24 777     23 774    
Net working capital 		 4     747  1 881  8 956     9 804     9 267    
Net interest-bearing debt 		 5     5 766  5 721  15 088     15 279     13 482    
Imperial owners' interest 		 8 243  11 104  20 742     20 173     18 868    
Non-controlling interest 		 931  896  667     909     1 838    
Contingent liabilities 		 674  958  649     770     405    
RATIOS 
Efficiency 
Revenue to average net operating assets (times)		 6     3,1  2,7  3,4     3,5     3,3    
Revenue relating to sale of goods to average inventory (times)		 7     4,8  4,2  4,0     4,4     4,5    
Revenue to average net working capital (times)		 37,8  25,8  12,6     12,5     12,8    
Profitability 
Operating profit to average net operating assets (%)		 8     15,3  15,9  18,9     19,0     18,8    
Operating profit to average gross operating assets (%)		 8,7  9,7  10,9     11,0     11,0    
Operating margin (%)		 9     5,0  5,9  5,5     5,4     5,6    
Return on average shareholders' interest (%)		 10     (0,5) 9,1  12,7     15,4     16,8    
Return on invested capital (%)		 11     10,4  12,4  12,4     12,8     13,1    
Weighted average cost of capital (%)		 12     10,2  8,5  9,0     9,5     9,0    
Solvency 
Interest cover by operating profit (times)		 6,0  5,0  3,9     4,4     5,2    
Net interest-bearing debt to EBITDA (times)		 1,6  1,5  1,7     1,7     1,5    
Total equity to total assets (%)		 27,9  33,8  29,4     28,4     29,3    
Net interest-bearing debt as a percentage of total equity (%)		 66,7  50,0  74,5     77,2     70,1    
Liquidity 
Free cash flow to net profit for the year (times)		 22,10  1,20  1,67     0,80     1,35    
Free cash flow to headline earnings (times)		 13     1,89  1,25  1,59     0,85     1,46    
Unutilised facilities 		 11 786  13 911  12 450     10 046     9 372    
INVESTING IN THE FUTURE                         
Cost of new acquisitions 		 22  537  1 796     352     1 076    
Net capital expenditure 		 1 005  507  2 663     4 138     4 519    
Capital commitments 		 212  216  1 448     1 309     2 289    
STATISTICS                         
Number of transport fleet vehicles (owned)		 6 622  7 596  7 288     7 238     7 133    
Number of employees 		 24 982  24 252  49 364     51 256     51 361    
Employee costs 		 10 575  10 351  16 623     16 528     15 647    
Wealth created per employee 		 566  587  511     498     475    
Total taxes and levies paid 		 14 649  779  1 510     1 661     1 496    
SHARE PERFORMANCE                         
Basic headline earnings per share (cents)		 542  585  1 390     1 552     1 624    
Dividends per share (cents)		 244  710  650     795     795    
Earnings yield (%)		 15 8,1  8,0  8,6     10,4     8,8    
Price earnings ratio (times)		 16 12,4  12,5  11,6     9,6     11,4    
Net asset value per share (cents)		 17 4 297  11 464  10 550     10 261     9 696    
Market prices (cents) – closing (30 June)* 		 5 143  19 589  16 100     14 948     18 550    
Total market capitalisation at closing prices 		 18 10 350  39 564  32 384     31 118     37 616    
Value of shares traded 		 30 675  45 495  34 198     37 985     34 159    
Value traded as a percentage of average capitalisation (%)		 123  126  108     111     86    
EXCHANGE RATES USED                         
Rand to Euro                         
   – average 		 16,18  15,34  14,81     16,10     13,73    
   – closing 		 16,06  16,01  14,92     16,31     13,55    
Rand to US Dollar                         
   – average 		 14,18  12,86  13,58     14,51     11,44    
   – closing 		 14,10  13,71  13,06     14,70     12,15    
Rand to British Pound                         
   – average 		 18,35  17,31  17,23     21,47     18,02    
   – closing 		 17,95  18,10  17,02     19,58     19,11    
Rand to Nigerian Naira                         
   – average 		 0,04  0,04  0,04     0,05     0,06    
   – closing 		 0,04  0,04  0,04     0,07     0,06    
Rand to Botswana Pula                         
   – average 		 1,33  1,29  1,29     1,34     1,20    
   – closing 		 1,33  1,32  1,26     1,35     1,23    
Rand to Australian Dollar                         
   – average 		 10,14  9,97  10,24     10,56     9,54    
   – closing 		 9,90  10,13  10,04     10,95     9,40    

* Assets, liabilities and equity were calculated by excluding net assets of discontinued operations for 2019 and 2018.

* 2015 to 2017 was for Imperial Holdings, prior to the unbundling of Motus.

Financial definitions:

  1. Free cash flow – calculated by adjusting the cash flow from operating activities to exclude the expansion capital expenditure on rental assets and deducting replacement capital expenditure on other assets.
  2. Operating assets – total assets less loans receivable, tax assets, cash resources and assets of disposal groups.
  3. Operating liabilities – total liabilities less all interest-bearing borrowings, tax liabilities, put option liabilities and liabilities of disposal groups.
  4. Net working capital – consists of inventories, trade and other receivables, contract assets, provisions for liabilities and other charges and trade and other payables.
  5. Net interest-bearing debt – includes total interest-bearing borrowings plus non-redeemable preference shares (in prior years) less cash resources.
  6. Revenue to average net operating assets (times) – revenue divided by average net operating assets.
  7. Revenue relating to sale of goods to average inventory (times) – revenue relating to sale of goods divided by average inventory.
  8. Operating profit to average net operating assets (%) – operating profit divided by average net operating assets.
  9. Operating margin (%) – operating profit divided by revenue.
  10. Return on average ordinary shareholders' interest (%) – net profit attributable to owners of Imperial divided by average shareholders' equity (calculated by using the opening and closing balances) attributable to Imperial shareholders.
  11. Return on invested capital (ROIC) (%) – return divided by invested capital. Return is calculated by reducing the operating profit by a blended tax rate, which is an average of the actual tax rates applicable in the various jurisdictions in which Imperial operates, increased by the share of results of associates and joint ventures. Invested capital is a 12-month average of shareholders equity plus non-controlling interests, plus non-redeemable, non-participating preference shares (settled on 13 August 2018) plus net interest-bearing debt (interest-bearing borrowings long term and short term less long-term loans receivable less non-financial services cash resources).
  12. Weighted average cost of capital (WACC) (%) – calculated by multiplying the cost of each capital component by its proportional weight, therefore: WACC = (after tax cost of debt % multiplied by average debt weighting) + (cost of equity multiplied by average equity weighting). The cost of equity is blended recognising the cost of equity in the different jurisdictions of the operations.
  13. Free cash flow to headline earnings ratio – free cash flow divided by headline earnings.
  14. Total taxes and levies paid – made up of South African normal tax, secondary tax on companies, foreign tax, rates and taxes, skills development and unemployment insurance fund levies.
  15. Earnings yield (%) – the headline earnings per share divided by the closing price of a share.
  16. Price earnings ratio (times) – the closing price of a share divided by the headline earnings per share.
  17. Net asset value per share – equity attributable to owners of Imperial divided by total ordinary shares in issue net of shares repurchased (the deferred ordinary shares only participate to the extent of their par value of 0,04 cents).
  18. Total market capitalisation at closing prices (Rm) – total ordinary shares in issue before treasury shares multiplied by the closing price per share.

Value-added statement for the year ended 30 June 2019

2019 
Rm 		   %  2018 
Rm 		   %   
Revenue  49 720     48 565    
Paid to suppliers for materials and services  (35 589)    (34 331)   
Total wealth created  14 131     14 234    
Wealth distribution 
Salaries, wages and other benefits (note 1) 10 575     75  10 351     73    
Providers of capital  1 207     9  1 323     9    
• Providers of debt  415     3  569     4    
• Providers of equity  792     6  754     5    
Government (note 2) 649     4  779     5    
Reinvested in the group to maintain and develop operations  1 700     12  1 781     13    
• Depreciation, amortisation, impairments and recoupments  1 461     1 408    
• Future expansion  239     373    
14 131     100  14 234     100    
Notes 
1 Salaries, wages and other benefits  
Salaries, wages, overtime, commissions, bonuses, allowances  9 518     8 812    
Employer contributions  1 057     1 539    
10 575     10 351    
2 Central and local governments 
Income tax  432     595    
Withholding and secondary tax on companies  39     25    
Rates and taxes  77     61    
Skills development levy  36     33    
Unemployment Insurance Fund  65     65    
649     779    

Note: 2018 and 2019 figures are for continuing operations only and exclude Motus and CPG.


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  • Imperial Logistics Integrated Annual Report 2019