Integrated Report 2020

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Group chief financial officer's review

In an ever-evolving logistics industry, increasing efficiency and agility are critical to competing effectively. We are organising ourselves more effectively as ‘One Imperial’, with a focus on delivering our strategy and preparing for a post-Covid-19 world.

Imperial delivered strong results in the first half of F2020, with challenging economic and market conditions dominating the second half, particularly in South Africa and Germany. Covid-19 restrictions imposed across all regions exacerbated the tough environment, severely reducing volumes across most sectors. However, new contract gains and acquisitions offset the impact of lower volumes to some extent. While revenue from continuing operations in H2 F2020 increased by 7%, mainly due to the benefits of these contract gains and acquisitions, continuing operating profit for H2 F2020 was down R1,1 billion in H2 F2019. This was largely due to the negative impact of Covid-19 on trading performance and the associated once-off costs of reducing fixed overheads, and further restructuring mainly in South Africa.

During the second half of the year, we focused on closely managing our cash flows, overhead costs and capital position to maintain the strength of our balance sheet in view of the ongoing uncertainty and to mitigate the impact of Covid-19. Despite these economic challenges, we grew revenue from continuing operations, generated good free cash flow, maintained a strong balance sheet and made significant strategic progress.

We incurred once-off costs of around c.R40 million to reduce fixed overheads and further rationalise, consolidate and restructure our portfolio, the benefits of which will be realised from F2021 onwards. We also successfully concluded the sale of our European shipping business, realising R3,4 billion in proceeds. Our net debt:EBITDA following the receipt of the proceeds of this disposal on 31 July 2020 is 1,6 times, converting foreign EBITDA using the spot rate at year-end, well below our banking covenants of 3,25 times, further bolstering our financial position and freeing up capital to invest in the group’s strategic initiatives.

Our strategic transformation journey is well underway, with the aim of organising and positioning Imperial based on the solutions we offer to our clients, which leverage our capabilities and competitive advantages, and less so on regions. From 1 July 2020, Imperial’s operating model comprises three businesses: Market Access, Logistics Africa and Logistics International. For IFRS reporting, our primary segmentation for this financial year remains our regional disclosure.

Group performance against medium-term guidance

  F2020 Medium-term guidance (over three years)
Revenue and operating profit   5% revenue growth
40% decrease in operating profit
  • Logistics: 2 times GDP growth plus inflation
  • Market Access: Low double-digit growth
Cash conversion continuing capex   72% Targeted cash conversion of 70% to 75%
Debt capacity   R4 billion to R5 billion (post-European shipping proceeds) R3 billion to R5 billion
Net debt: EBITDA used for bank covenant calculation (excluding IFRS 16)  
  • 2,8 times at 30 June 2020
  • 1,6 times post-European shipping disposal proceeds
<2,5 times
ROIC   4,9% (WACC: 7,6%) WACC + 3%
Dividend   Interim dividend of 167 cents; no final dividend Will be reviewed – depending on prevailing market conditions
Net working capital   5,1% of revenue 4% to 5% of revenue

Our strategic focus

In an ever-evolving logistics industry, increasing efficiency and agility is required to compete effectively. In the past few years, Imperial has undertaken significant corporate activity to refine the group's strategic focus and positioning, including the unbundling of Motus and the disposal of non-strategic and underperforming businesses. The transformation of the group from a regional portfolio of businesses to an integrated logistics group, will build on this progress, requiring significant investment in the right organisational structure, processes, systems, people and culture to support longer-term sustainable and profitable growth.

We want the finance function to be a strategic business partner that uses data-backed insights obtained through analysis, harmonised data, industry leading technology and best-in-class processes to assist our stakeholders with their decision making, while maintaining robust control and oversight over our processes.

Our transformational journey will shift the group from:
Current state of a future state of...
Increased cost to serve   Shared services centre for core common processes to reduce cost to serve across our business
Lowering enterprise productivity   Best-fit technology and automation to reduce manual effort and improve productivity
Disparate ways of working   Harmonised processes across core finance functions, promotes consistency, reduces risks and improves compliance
Limited financial visibility   Transparency and visibility of financial, and operational data drives quicker and improved decision making, faster financial close and improved financial compliance
Limited business agility   Consolidate solution footprint in cloud to integrate acquisitions and launch new products/services faster enabling growth
Focus areas

The finance function plays a key enabling role in supporting strategic delivery. We have identified three focus areas to deliver additional value – supporting insight-driven decision making powered by right-time data and analytics, driving excellence in our finance operations and service provision, and enhancing financial integrity, risk management and compliance.

From bottom line to
front line
  • Elevate the role of Imperial Finance from its current focus on transactional and backward looking activities and pivot toward forward looking, strategic business decision support.
Brilliant basics as a
  • Free up capacity through simplified, standardised, harmonised and automated processes.
  • Simplify finance records and consolidate the finance technology landscape to provide a single source of truth.
Eating the elephant
one bite at a time
  • Adopt a phased approach to build and implement our initiative pipeline in an agile manner, unlocking value rapidly throughout the process.

To achieve our objectives, we have planned a multi-step journey that will shift our culture from being inward, financially focused and siloed to being a strategic business partner supporting our businesses and divisions.

Multi-step journey to finance of the future
Short to medium term
Medium term




Simple, standard sustainable   Enable value realisation     Realise the value   Innovation, digitalisation and sustainable growth
  • Blueprint the foundation
  • Set up shared service centre
  • Build ‘One Imperial’ Finance
  • Pilot shared service centre in South Africa
  • Standardise for single version of the financial truth
  • Centralise additional functions
  • Implement advanced analytics and automation
  • Managed application and cloud outsourcing services
  • Touchless finance
  • FinTech evolution

We are implementing a group-wide finance solution to ensure that the group is equipped with the appropriate foundational systems and processes necessary for strategic execution. This has entailed designing a finance operating model that supports our transformation by setting up centres of excellence and shared services, which will aggregate all central services on a single business support platform for the group.

In the short term, we will deploy ‘One Imperial’ finance platform to standardise finance processes across the group and provide opportunity for automation and technology enhancements that leverage artificial intelligence to drive operational efficiencies. These investments will not only free up our people from manual work, allowing them to work more strategically, but will also promote enhanced compliance and support our overall control environment.

As we build forward looking finance functions across the group that provide strategic business decision support, using a streamlined system architecture that provides insights through right-time data, we anticipate better strategic decision making and improved operational efficiency.

The following strategic drivers will guide the ‘One Imperial’ Finance operating model:

We will transform from an accounting-driven organisation into business value architects

We will deliver group-wide services independently of businesses or functions

We will accommodate global and regional characteristics through standardised archetypes based on our business

We will use digital tools and technologies and leverage automation

We will leverage our partner ecosystem to source capabilities and to drive value at speed

We will optimise decision making by leveraging right-time data to make the right business decisions

We will use industry recognised language, processes and roles where possible

We will accommodate new ways of working agilely with stakeholders

We will embrace a culture of cost efficiency, cost transparency and value creation

We will reinforce governance and financial control through leading policies and platform solutions

We will structurally organise to support a self-directed and empowered workforce

We will increase collaboration across businesses, functions and finance

Strong financial position

Despite challenges posed by Covid-19, our balance sheet management remains resilient, with sufficient headroom and capacity. The pandemic had a significant impact on our earnings, largely in South Africa and the Eurozone, and our efforts to maintain strict cash flow, working capital and overall balance sheet management have ensured that we have not breached any of our debt covenants and have generated positive cash flows. We proactively engaged with a number of our lessors to negotiate extended lease agreements, and with our debt providers to keep them informed, and manage the ongoing uncertainty created by Covid-19 and the potential impact on our debt covenants.

Our cash and liquidity position remains strong with R13,2 billion of available facilities and cash post the proceeds of the European shipping disposal. Net debt (excluding lease obligations and before the receipt of the European shipping disposal proceeds) of R8,4 billion increased by 47% compared to June 2019 mainly due to investment in capital expenditure, acquisitions and foreign exchange translations at the end of the year when converting foreign debt to Rand.

We have continued to focus on reducing our fixed overheads, these being people, infrastructure and IT systems, and releasing capital in underperforming and non-core businesses. Our international operations have been significantly restructured to reduce the central overhead, and we continue to work on reducing our fixed overhead in South Africa. Imperial announced the sale of the European shipping business on 4 May 2020, while retaining our interest in the South American shipping business (still available for sale). This transaction was concluded on 31 July 2020 and more detail is provided in the financial performance section that follows.

Our ability to optimise our capital allocation to achieve our strategy within our means and risk tolerances, is crucial to delivering growth in the long term. Creating a leaner and more efficient structure and investing to drive a ‘One Imperial’ brand and culture, will enable responsive and responsible capital allocation that is forward looking and aligned with our strategic direction. We will prioritise capital allocation, based on detailed scenario analysis, to fund organic growth and be the ‘Gateway to Africa’, focusing on working capital in our market access solution, as well as investing in technology and data to deepen our digital capabilities.


Due to the uncertainty created by Covid-19 and the possibility of reintroduced restrictions, we will remain focused on maintaining our resilience by closely monitoring and managing our balance sheet and cash flows, and reducing our cost base where possible until we have more certainty about the trading environment.

This is a difficult and demanding time for many as the Covid-19 pandemic continues.

Many of our markets are facing increasing uncertainty and volatility, being in various levels of lockdown and restrictions. We therefore anticipate the impact of the Covid-19 pandemic to significantly impact our operations and performance in the short term.

At this stage, for F2021, subject to stable currencies, steady recovery in volumes and revenue on the back of easing Covid-19 restrictions, and a recovery in economies in which we operate from current levels, we expect Imperial’s continuing operations (excluding businesses held for sale) to deliver:

  • Revenue growth compared to the prior year.
  • Operating profit growth compared to the prior year.
  • Growth in continuing HEPS compared to the prior year.
  • Good free cash flow generation.

The balance sheet of the business remains sound, with sufficient headroom in terms of capacity and liquidity to facilitate our strategic growth aspirations.

The payment of a dividend will be reassessed at the interim results in February 2021, based on trading conditions for the next six months.

We will find our new normal in a post-Covid-19 world and be agile enough to scale our business accordingly. We will continue to leverage cost efficiencies, with selected capital expenditure while right sizing our businesses where appropriate.

Group financial performance

Summarised consolidated statement of profit or loss

for the year ended 30 June 2020

R million    
   2020     2019~   
Revenue        46 380  44 039     
Net operating expenses  (42 282) (39 423)    
Profit from operations before depreciation and recoupments     (11)     4 098  4 616     
Depreciation, amortisation, impairments and recoupments          (2 639) (2 203)    
Operating profit     (40)     1 459  2 413     
Impairment to properties net of recoupments           (194)  (6)    
Amortisation and impairment of intangible assets arising on business combinations          (393)  (400)    
Foreign exchange gain (loss)          93  (47)    
Other non-operating items          52  (1 111)    
Profit before net finance costs          1 017  849     
Net finance cost     26     (762) (605)    
Profit before share of results of associates and joint ventures  255  244     
Share of results of associates and joint ventures          22  39     
Profit before tax          277  283     
Income tax expense          (159) (386)    
Profit (loss) for the year from continuing operations  118  (103)    
Net loss from CPG          (305) (1 923)    
Net loss (profit) from the European shipping business          (39) 214     
Net profit from Motus Holdings Limited (Motus)              5 392     
Net (loss) profit for the year          (226) 3 580     
Net profit (loss) attributable to: 
Owners of Imperial  (303) 3 438     
– Continuing operations  42  (232)    
– Discontinued operations  (345) 3 670     
Non-controlling interest  77  142     
– Continuing operations  76  129     
– Discontinued operations  1  13     
~ Restated for adoption of IFRS 16 – Leases and re-presented for the European shipping business as a discontinued operation in terms of IFRS 5 –  Non-current Assets Held For Sale and Discontinued Operations. 

Operating profit from continuing operations decreased by 40%, negatively impacted by Covid-19 across all businesses and markets in which we operate.

The R6 million decrease in profit before tax to R277 million is mainly attributed to:

  • The decrease in operating profit;
  • Impairment to both owned and leased properties classified as right-of-use assets;
  • An increase in finance costs mainly due to the once-off gain that arose on the redemption of the preference shares of R63 million in the prior year that resulted in a reduction to finance cost in that period; offset partially by
  • A decrease in the amortisation of intangibles arising on business combinations as certain intangible assets were fully amortised in the prior year; and
  • R67 million foreign exchange losses on foreign exchange contracts compared to a R47 million loss in the prior year, and a gain of R160 million due to reduction in capital in foreign subsidiaries.

Other non-operating items mainly comprised gains on the remeasurement of the put option liability and contingent consideration liability offset partially by goodwill impairments which arose mainly due to higher discount rates used in valuations, and the net loss on the sale of businesses during the year.

Significant contributors to the higher effective tax rate were deferred tax assets that were not recognised for some loss-making entities.

The loss from discontinued operations comprises CPG and the European shipping business in the current financial year and Motus, the European shipping business and CPG in the prior financial year.

The decrease in non-controlling interests is mainly due to weaker performances across most businesses but mostly impacted by an increase in the share of losses in Pharmed, a decrease in the share of income from Surgipharm and non-controlling share of losses in MDS Logistics.

Pro forma earnings and headline earnings per share

for the year ended 30 June 2020

   2020  2019~   
Earnings (loss) per share  (109)    (161) 1 773    
Imperial Logistics  (84)    (161) (1 008)   
Continuing operations  22  (120)   
Discontinued operations (CPG)  (84)    (162) (992)   
Discontinued operations (Shipping)       (21) 104    
Discontinued operations (Motus)          2 781    
Headline earnings (loss) per share^  (84)    105  663    
Imperial Logistics  (13)    105  121    
Continuing operations  (65)    156  448    
Discontinued operations (CPG)  (63)    (161) (433)   
Discontinued operations (Shipping)       110  106    
Discontinued operations (Motus)  542    
~ Restated for adoption of IFRS 16 – Leases and re-presented for the European shipping business as a discontinued operation in terms of IFRS 5 –  Non-current Assets Held For Sale and Discontinued Operations.
^ 2019 HEPS re-presented for the early adoption of Headline Earnings Circular 1/2019. 

Financial position

at 30 June

R million 
   2020     2019~   
Goodwill and intangible assets     7 084  6 719    
Investment in associates and joint ventures  (62)    198  520    
Property, plant and equipment  26     3 326  2 647    
Transport fleet  (2)    5 186  5 309    
Right-of-use assets  13     5 422  4 780    
Investments and other financial assets  20     271  225    
Net working capital  (61)    544  1 389    
Net assets of disposal group and discontinued operations  839     2 781  296    
Retirement benefit obligation  (17)    (1 109) (1 343)   
Net debt excluding lease obligations  47     (8 391) (5 697)   
Lease obligations     (6 080) (5 969)   
Other financial liabilities  32     (1 415) (1 075)   
Net income tax assets  27     455  359    
Total shareholders’ equity       8 272  8 160    
Total assets  18     42 526  36 060    
Total liabilities  23     (34 254) (27 900)   
Net debt:equity % (excluding lease obligations)       101,4   69,8    
Net debt:equity % (including lease obligations)       174,9   143,0    
~ Restated for the adoption of IFRS 16 – Leases and IFRIC 23 – Uncertainty over Income Tax Treatments. 

The significant variances on the financial position at 30 June 2020 when compared to 30 June 2019 are explained as follows:

  • The increase in goodwill and intangible assets is mainly due to the new acquisitions and currency movements which were somewhat offset by the reclassification of goodwill to net assets of disposal groups.
  • Investments in associates and joint ventures decreased mainly due to the consolidation of MDS Logistics following the acquisition of a majority shareholding during the year.
  • Property, plant and equipment increased mainly due to currency movements and the new businesses acquired.
  • The increase in right-of-use assets is mainly attributed to currency movements and new leases during the period, offset by the depreciation and impairment charge to the income statement.
  • Net assets of disposal groups increased due to the reclassification of assets and liabilities relating to the European shipping business and the Pharmed Group to disposal groups at year-end.
  • Retirement benefit obligations decreased by the reclassification of the retirement benefit obligations in the European shipping business to disposal groups at year-end.
  • Investments and other financial assets increased mainly due to currency movements offset partially by the delivery of Motus shares to participants of the deferred bonus plan (DBP) scheme that was settled in September 2019.
  • The increase in other liabilities is mainly due to an increase in contingent consideration relating to the acquisitions in the African Regions – partially offset by a decrease in the put option liability as a result of minority buyouts in Eco Health and Imres, as well as revaluation of the put option liability and contingent consideration during the year.
  • Part of the decrease in net working capital is attributed to the reclassification of net working capital to net assets of disposal groups, net working capital improved from last year mainly due to excellent capital and cash flow management in F2020.
  • The movement in net debt excluding lease liabilities is explained in the cash flow summary that follows.
  • The increase in the lease liability is mainly due to lease payments during the period offset partially by new leases that were capitalised during the period as well as currency movements.

Movement in total equity for the 12 months to 30 June 2020

Total equity of R8 272 million decreased by R375 million from R8 647 million previously reported on 30 June 2019.

The following table details the changes in equity during the year:

Decrease in equity for the period to June 2020  Rm 
IFRS 16 adjustment to opening equity at 1 July 2019~  (487)
Comprehensive income  683 
Net profit attributable to Imperial shareholders   (303)
Net profit attributable to non-controlling interests  77 
Increase in the foreign currency translation reserve  1 004 
Decrease in the hedge accounting reserve  (29) 
Revaluation of retirement benefit obligation, net of tax  (66)
Movement in share-based reserve net of transfers to retained earnings  37 
Ordinary dividend paid  (530)
Repurchase of Imperial Logistics shares  (225)
Non-controlling interest acquired, net of disposals and shares issued  329
Net decrease in non-controlling interests through buyout  (54)
Non-controlling share of dividends  (128)
Total decrease  (375)
~ Restated for the adoption of IFRS 16 – Leases and IFRIC 23 – Uncertainty over Income Tax Treatments. 

Pro forma cash flow summary to June 2020 including CPG and European shipping in both periods excluding Motus in the comparative period

R million 2020  2019^*  
Cash flows from operating activities
Cash generated by operations before movements in net working capital 4 536  5 239     
Movements in net working capital 559  (21)  
Cash generated by operations before interest and taxes paid 5 095 5 218    
Net interest paid (918) (894)  
Tax paid (367) (580)  
Cash generated by operations 3 810  3 744    
Cash flows from investing activities  
Net acquisition of subsidiaries and businesses (276) (25)  
Expansion from capital expenditure (747) (471)  
Net replacement capital expenditure (735) (623)  
Net movement in other associates and joint ventures 45  286    
Net movement in investments, loans and non-current financial instruments (59) (169)  
Cash utilised in investing activities (1 772) (1 002)  
Cash flows from financing activities  
Hedge cost premium paid (2) (161)  
Settlement of interest-rate swap instruments (11) (13)  
Repurchase of ordinary shares (225) (262)  
Dividends paid (658) (792)  
Cash paid on change in non-controlling interests (277) (137)  
Capital raised from non-controlling interests 200    
Settlement of non-redeemable, non-participating preference shares (378)  
Payment of lease obligations (2 032) (1 684)  
Cash utilised in financing activities (3 205) (3 227)  
Movement in net debt before currency adjustments (1 167) (485)  
Free cash flow 1 043  1 437    
* For the cash flows including Motus in the prior year, please refer to the AFS online. The cash flows relating to Motus that have been excluded are operating cash outflow of R1 343 million,
   investing cash outflow of R231 million and financing cash outflow of R1 498 million.
^ Restated for IFRS 16 – Leases.

The balance sheet movement in net debt of R2 694 million includes currency movements of R1 327 million and other non-cash movements that are excluded from the cash flow movement of R1 167 million.

The following are the significant cash flow items:

  • Cash generated by operations before movements in net working capital of R4 536 million decreased by R703 million mainly due to lower operating profit which translated into the lower cash flow.
  • A decrease in net working capital from 30 June 2019 resulted in a cash inflow of R559 million. The decrease is mainly attributable to excellent capital and cash flow management in F2020. Net working capital was below our guidance of 4% to 5% of revenue at year-end, with a 12-month average of 5,1%. We expect this to normalise as revenue levels recover.
  • Net capital expenditure increased to R1 482 million from R1 094 million in F2019 primarily due to higher investment in fleet expansion as a result of the purchase of Lowveld Buses in South Africa, to support new contract gains, fleet replacement in South Africa, and investment in specialised new fleet in International.
  • Interest of R918 million and tax of R367 million were paid during the year.
  • Dividends amounted to R658 million during the year.
  • Other significant cash outflow items included lease liability payments of R2 032 million, share buybacks of R225 million and changes to non-controlling interests of R277 million.

The cash flow benefited from an inflow arising from movements in other associates and joint ventures mainly due to the sale of associates in the South African division during the period.

Free cash flow (post-maintenance capex and including discontinued operations) generation was resilient despite a decrease to R1 043 million from R1 437 million in the prior year. Free cash outflow from discontinued operations of R261 million (2019: R507 million) is included. Free cash flow (post-maintenance capex and excluding discontinued operations) decreased to an inflow of R1 304 million from a cash inflow of R1 944 million in F2019. This resulted in a continuing free cash flow to continuing headline earnings ratio of 4,42 times.


The group's liquidity position remains strong with R13,2 billion of unutilised banking facilities, following the receipt of the proceeds from the disposal of the European shipping business. In total, 76% of the group debt is long term in nature and 57% of the debt is at fixed rates.


An interim cash dividend of 167 cents per ordinary share was declared in the first half and paid to shareholders in March 2020. Our targeted payout ratio is 45% of continuing HEPS, subject to prevailing circumstances. As the interim dividend (paid from prior year reserves) was more than continuing HEPS for the full financial year to 30 June 2020 – and exceeding the targeted payout ratio – a final dividend was not declared. Therefore, the total cash dividend for F2020 is 167 cents per share (F2019: 244 cents per share).

  • Geka Pharma (Namibia)
    Imperial concluded the acquisition of a 65% stake in Geka Pharma, a distributor of pharmaceutical, medical, surgical and allied products in Namibia for c.R80 million which includes a contingent consideration of R31 million. Geka Pharma has been supplying pharmaceuticals to the healthcare industry in Namibia for more than 45 years. As previously communicated, this transaction is in line with Imperial's strategy to expand into healthcare in Namibia – leveraging its consumer footprint. The acquisition was effective 1 January 2020.
  • MDS Logistics (Nigeria)
    Imperial's acquisition of a further 8% equity stake in MDS Logistics, Nigeria's leading provider of integrated supply chain solutions, was concluded in January 2020. This transaction included Imperial transferring some existing profitable contracts to MDS Logistics, and paying a further USD2,4 million in cash. This takes our shareholding in the business from 49% to 57%. MDS Logistics provides a unique bouquet of logistics solutions through 48 distribution centres and 53 offsite inventory management centres covering over 30 states and a catchment area of over 400 cities and villages. Securing majority control in MDS Logistics will drive integration with Imperial's operations in Nigeria – facilitating the implementation of our value-added logistics offering through an end-to-end solution including transport, warehousing, distribution and market access, and as such leveraging our capabilities in this market.
  • Far East Mercantile (Ghana)
    Effective 1 January 2020, Imperial acquired a 51% interest in Far East Mercantile Ghana (ACP Holdings based in Mauritius) for approximately c.USD20,3 million, which includes a contingent consideration of approximately USD9,5 million. The trading operations are based in Ghana and is well established as an importer and distributor of FMCG. With eight branches across Ghana, the business represents over 30 global brands in various consumer food, beverages and personal care categories. This acquisition is in line with Imperial's strategy to accelerate its growth in Africa, with a strategic focus on the consumer goods and healthcare sectors. Imperial will leverage synergies in the business' expansive Ghanaian network and market access solutions to enhance its capabilities, primarily in healthcare and consumer, in the region. The business currently has direct coverage of over 22 000 retail and wholesale outlets in Ghana and is an integral part of Imperial's strategy to increase its presence in the burgeoning West African consumer markets.
  • Axis Group International
    Effective end December 2019, Imperial acquired a 60% shareholding in Axis Group International which specialises in sourcing and procurement in Asian markets, for a total purchase consideration of USD12 million, which includes a contingent consideration of USD7,3 million. This is a strategically aligned transaction as it will facilitate trade between Imperial's present client base and companies based in China and other Asian markets through the group sourcing and purchasing of products in these markets – and providing market access to companies wanting to trade in these particular regions.
  • Imperial Sasfin Logistics minority buyout
    Imperial acquired the remaining minority shares within the entity previously known as Imperial Sasfin Logistics for R12 million. The change in ownership through this transaction was required to facilitate one of Imperial's strategic objectives to be an international logistics provider managing clients' international freight requirements on a door-to-door basis. The business has been renamed Imperial Clearing and Forwarding.
  • Air/Ocean freight business in Turkey
    Imperial entered into a partnership with Turkish freight forwarder M Ekspres (known as MEX) in June 2020, creating a new multi-modal freight management business housed within Imperial's freight management capability – specialising in traffic to, from and transiting Turkey. The business is based in Istanbul and provides air and ocean import and export forwarding services to existing clients of both Imperial and MEX, as well as new customers. In addition, it plans to leverage the fast-growing range of global destinations served from Istanbul's new airport, as a gateway for traffic to the African continent. This is aligned to Imperial's strategy to serve as a 'Gateway to Africa' and facilitating trade flows into and out of the continent.
Acquisitions concluded post-year-end
  • Market access healthcare manufacturing in South Africa
    Effective August 2020, Imperial acquired a 49% shareholding in Pharmafrique Proprietary Limited (trading as Kiara Health) for c.R76 million. Kiara Health is a pharmaceutical manufacturing and healthcare services company based in Johannesburg which serves as the local manufacturing partner for a global leader in generic and biosimilar medicines. This acquisition is in line with Imperial's strategy to backward integrate into contract manufacturing as part of its market access service to multinationals on the continent. Access to this capability will create a pipeline of opportunities for our market access and logistics services in the healthcare industry in South Africa.
Disposals (concluded post-year-end)
  • European shipping operations
    Effective 31 July 2020, Imperial disposed of its interest in our European shipping business to the Cologne-based Häfen und Güterverkehr Köln AG (HGK). The aggregate purchase price of €171 million (approximately R3,4 billion) was settled by HGK in full and in cash on the date of implementation. The shipping business is non-core to Imperial's strategic imperative – which is to grow our African footprint and reach, and position the group as the 'Gateway to Africa' in the medium to long term.

    The proceeds from this sale have been used to pay down existing debt in the short term and will be invested in new growth areas in line with our strategy in due course.

    The South American shipping business will continue to operate on a standalone basis and remains available for sale.
  • Pharmed
    Imperial has entered into an agreement for the sale of our Pharmed business in South Africa to the Arrie Nel Pharmacy Group. Focused on independent healthcare professionals, Pharmed is our South African pharmaceutical wholesaler – providing prescription and homeopathic medicine, surgical, dental and veterinary products to independent pharmacies, corporate pharmacies, private hospitals and dispensing doctors.

    The South African wholesaler landscape has become increasingly competitive and it has become clear that a retail network and significant scale – and the associated investment – are essential if such a business is to survive and thrive. Pharmed, with its high-cost base and limited scale, has accordingly become increasingly uncompetitive and continues to underperform.

    Despite numerous management efforts and initiatives undertaken over the past months to return the business to profitability, it is evident that the business would be better placed to grow in the hands of an owner such as Arrie Nel – where the closer alignment of strategic focus and capital allocation capabilities will enable the required growth investments. We anticipate this deal to be concluded in the first quarter of the 2021 financial year, subject to Competition Commission approval.

    It is important to note that the disposal of Pharmed does not represent our exit from the healthcare industry in South Africa but merely the exit from non-core wholesale activities. The high growth and resilient healthcare industry remains key to our 'Gateway to Africa' strategy and we remain committed to the many multinational principals and clients we serve across the African continent. We will continue to serve such principals and clients through our logistics business – and through the ongoing expansion of our healthcare market access business in South Africa.

George de Beer

Group chief financial officer

Five-year review

Financial  definitions    2020~
Revenue   46 380  44 039       48 565       118 567       118 849      
Operating profit   1 459  2 413       2 868       6 538       6 382      
Net financing costs   (762) (605)     (569)     (1 680)     (1 440)    
Share of result of associates and joint ventures   22  39       56       103       138      
Income tax expense   (159) (386)     (620)     (1 060)     (1 221)    
Tax rate (%) 62,2  158,3       35,6       30,1       28,6      
Net profit attributable to non-controlling interests   76  129       168       (36)     184      
Headline earnings   295  870       1 139       2 700       2 994      
Cash generated by operations (before capital expenditure on rental assets, net financing costs and tax paid) 5 095  5 332       3 336       9 076       8 143      
Cash flow from investing activities (including capital expenditure on rental assets) (1 772) (1 233)     960       (3 648)     (3 199)    
Net debt (raised) repaid   (1 167) (3 557)     1 472       437       (1 657)    
Payment of lease obligations   2 032  1 684       –       –       –      
Free cash flow   1     1 043  1 437       1 420       4 296       2 536      
Total assets   42 526  36 060       75 841       68 853       69 835      
Operating assets   2     31 880  32 443       35 028       61 025       58 783      
Operating liabilities   3     11 944  12 510       11 484       26 000       24 777      
Net working capital   4     544  1 389       1 827       8 956       9 804      
Net interest-bearing debt   5     8 391  5 697       5 198       15 088       15 279      
Lease obligations   6 080  5 969       5 850      
Imperial owners' interest   7 320  7 774       22 321       20 742       20 173      
Non-controlling interest   1 218  913       886       667       909      
Contingent liabilities   786  489       958       649       770      
Revenue to average net operating assets (times) 6     2,3  2,0       2,7       3,4       3,5      
Revenue relating to sales of goods to average inventory (times) 7     5,0  4,8       4,2       4,0       4,4      
Revenue to average net working capital (times) 48,0  27,4       25,8       12,6       12,5      
Operating profit to average net operating assets (%) 8     7,3  11,1       15,9       18,9       19,0      
Operating profit to average gross operating
assets (%)
4,5  7,2       9,7       10,9       11,0      
Operating margin (%) 9     3,1  5,5       5,9       5,5       5,4      
Return on average shareholders' interest (%) 10     0,6  (1,5)     9,1       12,7       15,4      
Return on invested capital (%) 11     4,9  7,6       12,4       12,4       12,8      
Weighted average cost of capital (%) 12     7,6  8,5       8,5       9,0       9,5      
Interest cover by operating profit (times) 1,9  4,0       5,0       3,9       4,4      
Net interest-bearing debt to EBITDA (times) 2,0  1,2       1,5       1,7       1,7      
Total equity to total assets (%) 19,5  22,6       33,8       29,4       28,4      
Net interest-bearing debt as a percentage of total equity (%) 101,4  69,8       50,0       74,5       77,2      
Free cash flow to net profit for the year (times) 8,84  (13,95)     1,20       1,67       0,80      
Free cash flow to headline earnings (times) 13     3,54  1,65       1,25       1,59       0,85      
Unutilised facilities          10 620      11 786       13 911       12 450       10 046      
As per the numbers reported in the Imperial Logistics Limited audited annual financial statements for the year ended 30 June 2020 with the exception of the 2019 free cash flow that excludes Motus.
As previously reported except for the financial position that has been restated for the adoption of IFRS 16 – Leases and IFRIC 23 – Uncertainty over Income Tax Treatments.
As previously reported. 
Financial  definitions     2020~
Cost of new acquisitions  933  22     537     1 796     352    
Net capital expenditure  1 482  1 273     507     2 663     4 138    
Capital commitments  114  212     216     1 448     1 309    
Number of transport fleet vehicles (owned) 5 068  6 520     7 596     7 288     7 238    
Number of employees  25 232  27 463     29 944     49 364     51 256    
Employee costs  10 517  9 749     10 351     16 623     16 528    
Wealth created per employee  587  530     587     511     498    
Total taxes and levies paid  14     347  564     779     1 510     1 661    
Basic headline earnings per share (cents) continuing operations  156  448     585     1 390     1 552    
Dividends per share (cents) 167  244     710     650     795    
Earnings yield (%) 15     4,0  8,7     8,0     8,6     10,4    
Price earnings ratio (times) 16     25,2  11,5     12,5     11,6     9,6    
Net asset value per share (cents) 17     3 783  3 960     11 464     10 550     10 261    
Market prices (cents)
– closing  3 933  5 143     19 589     16 100     14 948    
Total market capitalisation at closing prices  18     7 948  10 350     39 564     32 384     31 118    
Value of shares traded  12 674  30 675     45 495     34 198     37 985    
Value traded as a percentage of average capitalisation (%) 139  123     126     108     111    
Euro to Rand 
– average  17,32  16,18     15,34     14,81     16,10    
– closing  19,51  16,06     16,01     14,92     16,31    
US Dollar to Rand 
– average  15,67  14,18     12,86     13,58     14,51    
– closing  17,37  14,10     13,71     13,06     14,70    
British Pound to Rand 
– average  19,74  18,35     17,31     17,23     21,47    
– closing  21,46  17,95     18,10     17,02     19,58    
Nigerian Naira to Rand 
– average  0,04  0,04     0,04     0,04     0,05    
– closing  0,04  0,04     0,04     0,04     0,07    
Botswana Pula to Rand 
– average  1,40  1,33     1,29     1,29     1,34    
– closing  1,47  1,33     1,32     1,26     1,35    
As per the numbers reported in the Imperial Logistics Limited audited annual financial statements for the year ended 30 June 2020 with the exception of the 2019 free cash flow that excludes Motus.
As previously reported except for the financial position that has been restated for the adoption of IFRS 16 – Leases and IFRIC 23 – Uncertainty over Income Tax Treatments.
As previously reported. 
1. Free cash flow – calculated by deducting replacement capital expenditure and lease payments from the cash flow from operating activities.
2. Operating assets – total assets less loans receivable, tax assets and assets of disposal group.
3. Operating liabilities – total liabilities less interest-bearing borrowings, tax liabilities and put option liabilities.
4. Net working capital – inventories plus trade, other receivables and contract assets less trade and other payables and provisions.
5. Net interest-bearing debt – interest-bearing borrowings, less cash resources.
6. Revenue to average net operating assets (times) – revenue divided by average net operating assets.
7. Revenue relating to sales of goods to average inventory (times) – revenue relating to sales 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' interest (calculated by using the opening and closing balances) attributable to shareholders.
11. Return on invested capital (%) – 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 we operate. Invested capital is a 12-month average of shareholders' equity plus non-controlling interests, plus net interest-bearing debt (interest-bearing borrowings long term and short term minus non-financial services cash and cash equivalents), plus lease obligations.
12. Weighted average cost of capital (%) – calculated by multiplying the cost of each capital component by its proportional weight and then summing, therefore: ACC = (after tax cost of debt % multiplied by average debt weighting) + (cost of equity multiplied by average equity weighting).
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 taxation, foreign taxation, rates and taxes, skills development and unemployment insurance fund levies.
15. Earnings yield (%) – the headline earnings per share divided by the closing price per 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 – continuing operations

for the year ended 30 June 2020

%   2019*
Revenue 46 380  44 039 
Paid to suppliers for materials and services (31 577) (29 496)
Total wealth created 14 803  14 543 
Salaries, wages and other benefits (note 1) 10 517  71   9 749  67
Providers of capital 1 292  9   1 635  11
– Providers of debt 762  5   605  4
– Providers of equity 530  4   1 030  7
Government (note 2) 347  2   564  4
Reinvested in the group to maintain and develop operations 2 647  18   2 595  18
– Depreciation, amortisation, net of impairments and recoupments 2 639  2 203 
– Future expansion 392 
14 615 100   14 365  100
1. Salaries, wages and other benefits
Salaries, wages, overtime, commissions, bonuses and allowances 9 440   8 813
Employer contributions 1 077   936
10 517   9 749
2. Central and local governments
Income tax 134   347
Withholding and secondary tax on companies 25   39
Rates and taxes 104   77
Skills Development Levy 34   36
Unemployment Insurance Fund 50   65
347   564
* Restated for IFRS 16 – Leases and for the European shipping business discontinued operations.