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Integrated Report 2020
Currently viewing: Chairman's letter to stakeholders / Next: Our governance
2020 will most certainly conjure up many mixed feelings, irrespective of the corner of the globe you reside in, the sector of business you are in and the hopes you had for it. The impact of Covid-19 has taught us much about how quickly the world can change and has demonstrated our ability as people and nations to collaborate, adapt and find new ways forward in unforgiving circumstances.
As I pen this letter, we are at a stage where our emergence from this pandemic seems more realistic and closer than before; but despite the silver lining, the loss of many lives the world over and in our business will remain a constant reminder of the fragility of life, how connected we are, and the impact of globalisation on us all.
Despite the unexpected trials and tribulations that the last two quarters of our 2020 financial year visited upon us, our business has proven its resilience amid continued economic headwinds and the devastating impact of the pandemic. On reflection, the hard, yet necessary, strategic calls made last year made a material difference in our ability to weather this storm, and to continue planting our flag in new sectors of the economies we serve and win new clients and business.
While the strategic choices made last year have underpinned the progress we have made and shown our resilience, the ability of our business and people to adapt and innovate has been the difference in this case.
The World Economic Forum's aptly crafted theme for its 2021 meeting, 'The Great Reset', captures holistically the revolutionary impact that Covid-19 had - and will continue to have - across the world. The learning in 2020 is that those companies and organisations who adapt and can respond quickly to change stand a greater chance of success and survival.
Like every business and organisation, the impact of Covid-19 on our business has been marked; from new health and safety protocols, trucks standing idle at warehouses, employees working from home, to the loss of some of our colleagues - its mark has been indelible.
As the board, we are especially proud of the manner in which the leaders of our business have contributed to the fight against Covid-19, especially in ensuring that our countries of operation continue to function, albeit under highly constrained conditions.
Be it from ensuring delivery of food and pharmaceutical supplies to our sales channels in the countries we operate in and outside of South Africa, the provision of Covid-19-related services to South Africa at a time when there were no inbound flights, taking the decision to continue paying our thousands of employees during the hard lockdown and after, to the donations made to worthwhile causes in support of the pandemic; Imperial's contribution has been significant and essential. I thank members of the board and executive management who volunteered to contribute 25% of their earnings for a quarter, some of which was donated to the Solidarity Fund in support of its initiatives.
Imperial, as expected, delivered a mixed bag of results. Performance was affected by continued economic headwinds in one of our key markets, South Africa, including the much-anticipated sovereign downgrade, the dent on investor confidence and the impact of the pandemic. The green shoots included the benefits of closing CPG, which was effectively handled and saved more jobs than expected; the successful disposal of the European shipping business, which was finalised after year-end; acquisitions to further entrench our 'Gateway to Africa' strategy and market access footprint; and the organisational transformative work underway.
While the first half of the year was characterised by strong results, second-half results were severely impacted by Covid-19, with the last quarter affected by the hard lockdown announcements in most of the countries where we operate. Despite this, continuing revenue grew by 5% to R46,4 billion although continuing operating profit was down 40% to R1,5 billion. While our net debt:EBITDA position was well within our banking covenants and our balance sheet was boosted by the receipt of sale proceeds in July, the board took a decision not to declare a dividend in the second half, after the interim distribution, given the decline in earnings for the full year.
Despite an operating performance that fell short of our expectations, Imperial's financial performance showed underlying resilience in good cash flow generation, well-managed overhead costs and a strong balance sheet. We are confident that the strategic calls we have made and our clear strategic focus for F2021, coupled with the expected improvement in global economic performance and sentiment, will deliver a much improved F2021 financial performance.
We are cognisant of the many downside risks to our expectations for the shape and rate of economic recovery in our markets, and the related uncertainties. We are hopeful, however, that the pandemic will prove to be a catalyst for faster and more enabling structural reform, for deeper humanity, morality and accountability from leaders in business, government and society, as we move into a post-Covid-19 world.
The 2021 financial year will be the continuation of an exciting strategic pursuit which has informed strategic decisions announced and executed on since 2019.
Our strategy to transform and grow Imperial is rooted in a thorough understanding of how best we can create shared value for our stakeholders over the long term.
In keeping with the strategic path we have undertaken, which has been communicated to our people, shareholders and other stakeholders, our strategic focus areas for the next few years are:
We are excited about this strategic path, which will also see a change in the business reporting structure and how we do business as an organisation. Our strategic journey is specifically underpinned by a strong focus on our people, systems and processes to ameliorate any execution risk and to enhance delivery of results, and our intention to be a purpose-driven organisation that integrates ESG in the way we do business every day will support our ability to create sustainable shared value.
I invite you to read about our governance journey, in our governance summary , specifically the 'governance in action' pieces from the chairmen of our board sub-committees. They not only capture some key deliberations and dilemmas we faced during the year, centred around Covid-19, but they discuss important features of Imperial's resilience, and give reasons for confidence in our ability to weather this storm, and to transform and thrive.
During the year under review, we welcomed the appointment of Ms Bridgette Radebe and Mr Dirk Reich as independent non-executive directors with effect from 1 September 2019. Bridgette has also assumed the role of chairman of the audit and risk committee with effect from 25 August 2020. We extend a warm welcome to both Bridgette and Dirk to the board. Having had the benefit of a few months with them, we are delighted about their contribution to our board and deliberations.
We bid farewell to Ms Thembisa Skweyiya, who resigned on 31 December 2019. On behalf of the board, a special note of thanks to you, Thembisa, for your tireless contribution, wise counsel and steer of the social and ethics committee. We wish you well in your future endeavours.
On the executive front, at the end of February 2020, we bid farewell to Mr Nico van der Westhuizen after 26 years with Imperial. At the time of his retirement, Nico was the chief executive officer (CEO) of Imperial Logistics South Africa (ILSA). Thank you, Nico, for all your dedicated service and stewardship over the years. Edwin Hewitt, who has extensive business and executive experience, assumed the role of CEO of ILSA (now Logistics Africa) with effect from 1 March 2020, and we welcome Edwin to the executive team.
Despite what has been one of the most testing periods of any time I can remember, I extend great appreciation to, our CEO, Mohammed Akoojee, our CFO, George de Beer, the members of the Imperial executive team, and to our employees, for their herculean effort in what has been a period of unconventional and unexpected challenges both professionally and personally. Your endless effort, courage, decisiveness and vision have contributed to the resilient organisation we are today. We as the board thank you sincerely for all your efforts and the strides you have made.
Our deepest condolences to the families of our 11 colleagues who succumbed to the pandemic and to those who lost their lives in the line of duty, we stand with you in your grief and bereavement.
I thank all our stakeholders, including our shareholders, who continue to engage with us constructively on key matters that impact on our business and our society.
Lastly, my special appreciation to my colleagues on the board, who despite not receiving a manual on how to navigate these uncharted shores, continue to be a pillar of strength to me, the executive team and the organisation in its entirety. Your counsel, steady hand and wisdom during this difficult time is a testament of your commitment to Imperial and her continued success.
Phumzile Langeni
Chairman
