Logistics Africa was previously Logistics South Africa and now includes logistics activities across the continent. It offers road freight, contract logistics and LLP in Africa. Logistics International offers road freight, contract logistics, air/ocean and LLP activities outside of Africa, most notably our contract logistics and freight businesses in Europe and the UK.

With a focus on technology and data, we leverage technology and digital innovation to improve efficiency (through automation) and provide differentiated services to our clients and principals by developing integrated system solutions that provide full end-to-end visibility. We will continue to develop and enhance industry specialisation capabilities and, where relevant, will reduce our reliance on tangible assets, emphasising solution management over asset management.

Our core offerings

We aim to be the leading logistics partner to our clients, leveraging our international footprint and expertise. Our core offerings include:

• Contract logistics.
• Freight.
  • Road freight management services.
  • Air and ocean freight management services.
  • LLP.

Our unique value proposition

Our commitment to operating as 'One Imperial' means we offer our clients, principals and customers an end-to-end integrated logistics solution that - in combination with our Market Access business – enables them to grow and remain relevant in Africa.

Operating context

Logistics Africa currently operates mainly in South Africa where prevailing weak economic conditions, high unemployment and low consumer spending were exacerbated by Covid-19 and volumes declined across most sectors, due to lockdown restrictions.

Logistics International operates mainly in the Eurozone and the UK and is largely focused on mature German manufacturing industries - such as automotive, chemicals and steel, and was most impacted by the Covid-19 pandemic, with significant reduction in volumes and activities in March, April and May, as many industries experienced complete lockdown.

How we support the Imperial strategy

• Operate in key industries: consumer, healthcare and automotive.
• Rationalise portfolio to move to asset-light capabilities.
• Venture into new key industries and capabilities.
• Ability to influence distribution logistics and create opportunities to further cross-sell and upsell services across the different businesses (market access, freight, contract logistics).
• Well positioned to use technology and data to differentiate Imperial.

Market trends

Our strategy

Achieving our strategic objectives will enable us to consistently and competitively provide clients, principals and customers with a fully integrated 'One Imperial' managed, multi-modal network, that sustainably grows our business and drives the 'One Imperial' and 'Gateway to Africa' imperatives.

Strategic objectives

• 'Gateway to
  Africa'

  Creating an international, in-country multi-modal network applying an asset-right model.

• Sustainable revenue growth

  Retention and growth of existing clients, and new clients in existing service segments.
  
  New revenue streams and services.

• Client centricity
  and improved competitiveness

  Cross-selling and upselling strategic accounts.
  
  Custom-designed solutions to address clients' unique requirements.

• Industry specialisation

  Enhance industry specialisation capabilities where there are greater barriers to entry and generally higher financial returns.

• Simplification and standardisation

  Focus on standardisation and integration of leading practice processes and systems to unlock value in current operations.

• Digital and technology

  Invest in digital innovation and leverage integrated technology and data platforms to create opportunities for new products and services.

Supported by our key enablers

PEOPLE AND CULTURE	SYSTEMS		PROCESSES		DIGITAL AND DATA
Measured by our strategic KPIs Revenue growth (driven by organic growth and selected strategic acquisitions). Margin growth. Improved market share. Exit unprofitable, non-performing and non-core businesses. Create value for clients, principals and customers

Our logistics solutions

We tailor insight-led relationships to our clients, which serve to deepen their competitiveness and relevance in their industries and markets.

Contract logistics

In keeping with our 'One Imperial' and 'Gateway to Africa' strategies, our contract logistics services include developing market entry strategies, consulting, production logistics, warehousing, distribution, spare parts logistics and value-added services. Our unique value proposition enables our clients to establish and grow their brands in Africa. Our focus is on leading in Africa by offering clients and principals an integrated supply chain solution grounded in an on-the-ground African presence.

Our key initiatives

• Operational excellence through standardisation of processes to ensure synergies, and operational improvements to reduce overheads and improve customer satisfaction.
• Rationalising our portfolio to focus on industries where we can offer asset-right solutions.
• Entering the ecommerce market to improve last mile delivery across Africa.
• Offering customised solutions to address specific client requirements.
• Realising efficiencies, cost reduction and increased margins through digitalisation, automation and data-driven decision making.
• Identifying new revenue generating opportunities by adopting technology and digital tools and platforms.

Region-specific initiatives
Africa			International
Expand service offering into target industries across the continent.			Geographical expansion within existing industries and strategic capabilities.

Freight

Road freight

The market is highly fragmented, commoditised and competitive, with new entrants introducing digital, client-centric offerings. We will reposition our African and International road freight management offering as more agile and adaptive to changing market demands, optimising resource deployment and extracting synergies across all our capabilities.

Our robust African freight forwarding capability and overall focus on Africa supports our value proposition. We will continue to focus on integrated solutions that improve real-time end-to-end visibility; and we will continue to invest in people and technology that deliver this competitive edge for the group.

Our key initiatives

• Capture synergies through integration by adopting the 'One Imperial' operating model, simplifying and strengthening business support through rationalisation, and supporting the air and ocean business where appropriate.
• Driving revenue growth and margin protection by exploring new customers in existing service segments, enhancing our offerings with new product segments and value-added services, and driving Palletways' growth.
• Using technology as a booster by introducing the One Network solution standard, and using technology to support synergy across businesses.
• Driving industry specialisation by extending existing operations and enhancing our offerings.

Air/ocean freight

A globally supported and robust air and ocean freight forwarding capability is a necessary offering in our ‘Gateway to Africa’ strategy to facilitate trade flows into and out of Africa. It can also generate sustainable organic growth through direct cross-selling opportunities.

Our key initiatives

• Create an international network through targeted partnerships or acquisitions to meet client needs and further enhance the ‘Gateway to Africa’ objective.
• Grow through partnerships, mergers or acquisitions, acquiring air/ocean capability to enter the market and gain initial competency and scale.
• Establish an experienced, effective and connected sales force by attracting key people and teams to develop our customer network and customer relation matrix (global, regional, local).
• Capture synergies by working closely with Road Freight, LLP and Contract Logistics and deliver an integrated solutions architecture.
• Leverage Palletwaves and Palletwings model to increase reach and expand network.
• Use technology as a booster to develop fully integrated system solutions that provide end-to-end visibility across different service lines and operations, and to increase network reach by scaling in asset-light practices and by owning platforms that drive and consolidate volume across an integrated ‘One Imperial’ network.

Region-specific initiatives
Africa		International
Expand service offering into target industries through new capabilities. Focus on the chemicals industry given its positive prospects.		Geographical expansion of our groupage services as well as right sizing our existing freight organisation.

Lead logistics provider

There is increasing demand for a supply chain integrator that assembles and manages a solution for clients, by collaborating with regional and specialist service providers. This aligns to our 'One Imperial' strategy, and directs us to create a vision of a homogeneous LLP capability across all our regions. This capability will enable us to design and operate integrated multi-modal freight management solutions that complement our freight management, contract logistics and market access solutions.

Our key initiatives

• Improving competitiveness by realising our potential for outcomes-based remuneration.
• Investing in customised solutions that address unique client needs, provide access to new markets, and provide capabilities and offerings where Imperial does not currently have a presence.
• Offering 'Gateway to Africa' services in geographies where Imperial does not have a 3PL presence.
• Enabling capabilities in freight management, contract logistics and market access.
• Offering a high level of automation and best-in-class technology solutions tailored to clients, based on our flexible IT model and digital first approach.

Focus areas

Growing our business and delivering on our strategic objectives requires a clear sense of purpose and positioning, and a focus on optimal integration of our people, partnerships and processes to serve the needs of our clients, principals and their customers.

				Logistics Africa		Logistics International
World class		Develop blueprint to deliver consistent, integrated and compliant services and brand experience across different markets, as 'One Imperial'. 'Brilliant basics': focus on standardisation and integration of practices to unlock value in current operations.		Portfolio rationalisation (F2021 - F2022) Industry specialisation (F2021 - F2022) Organisation of the future design (F2021 - F2023) Operational excellence (F2021 - F2023) Client centric commercial excellence focus (F2021 - F2025)		Acquire, partner, integrate and scale Air/Ocean capability (F2021 - F2024) Portfolio rationalisation (F2021 - F2024)
One-stop shop and international relevance		Establish air and ocean capability as an additional growth engine and align International business to support our strategic intention to connect Africa to the world. Optimise our exposure to hard assets to achieve an asset-right position in line with the specialised requirements of major clients.
Growth engines		Continue to develop and enhance specialised capabilities where there are greater barriers to entry and generally higher financial returns. Target strategic accounts by offering purpose built, specialised solutions that optimise the full value chain across regions and solutions. Increase network reach by scaling in an asset-light way and owning the platforms to drive and consolidate volume.
Focus on technology and data		Leverage technology and digital innovation to improve efficiency (through automation) and differentiate ourselves from competitors. Give clients integrated system solutions with full end-to-end visibility and great user interfaces. Leverage data to turn insights into actions, thus developing new products, services and revenue streams.		Project Blue Fleet (F2021) Harnessing data to drive growth (F2021 - F2022) Ecommerce fulfilment (F2021 - F2022) IT transformation (F2021 - F2022) Warehousing management (F2021 - F2023) Process automation (F2021 - F2023) IT transformation (F2021 - F2023)		Harnessing data to drive growth (F2021 - F2022) Process automation (F2021 - F2022) Innovation lab (F2021 - F2022) Mobile apps (F2021 - F2022) Digital fleet management (F2021 - F2022)

Performance

Logistics Africa

Logistics Africa (previously South Africa and now encompassing logistics activities throughout the continent) encompasses road freight, contract logistics and LLP in Africa. Logistics will continue to play an integral role in achieving our 'Gateway to Africa' and 'One Imperial' strategic imperatives - leveraging freight, contract logistics and supply chain support, cross-selling and upselling opportunities with our Market Access business.

Pro forma Logistics Africa segment results

				Half year 1 unaudited							Half year 2*
Logistics Africa		2020		2019		%  change			2020		2019		%  change
Revenue (Rm)		8 016		7 407		8			6 856		7 048		(3)
EBITDA (Rm)		1 075		959		12			601		1 011		(41)
Operating profit (Rm)		658		616		7			109		548		(80)
Operating margin (%)		8,2		8,3					1,6		7,8
Return on invested capital (%)		14,1		12,8
Weighted average cost of capital (%)		9,2		10,2
Net debt including IFRS 16 - lease liability (Rm)		4 016		3 636		10
Net debt excluding IFRS 16 - lease liability (Rm)		2 308		2 067		12
Working capital (Rm)		(285)		644

					Full year unaudited
Logistics Africa			F2020		F2019^		%  change
Revenue (Rm)			14 872		14 455		3
EBITDA (Rm)			1 676		1 970		(15)
Operating profit (Rm)			767		1 164		(34)
Operating margin (%)			5,2		8,1
Return on invested capital (%)			9,0		12,7
Weighted average cost of capital (%)			8,1		9,8
Net debt including IFRS 16 - lease liability (Rm)			4 226		2 796		51
Net debt excluding IFRS 16 - lease liability (Rm)			2 426		1 282		89
Working capital (Rm)			(786)		(358)

Note: Continuing operations, excluding head office costs and eliminations.
^	Prior year numbers have been restated for the impact of IFRS 16 - Leases where applicable.
*	Half year 2 numbers are unaudited and derived from deducting the half year 1 results from the full year published results of 30 June 2020.

Logistics Africa

				Full year*
		F2020		F2019^		%  change
Freight Management
Revenue (Rm)		8 706		9 096		(4)
EBITDA (Rm)		1 052		1 133		(7)
Operating profit (Rm)		543		709		(23)
Operating margin (%)		6,2		7,8
Contract Logistics
Revenue (Rm)		6 166		5 359		15
EBITDA (Rm)		624		837		(25)
Operating profit (Rm)		224		455		(51)
Operating margin (%)		3,6		8,5

Note: Continuing operations.
*	Unaudited.
^	Prior year numbers have been restated for the impact of IFRS 16 - Leases where applicable.

The pro forma regional performance results for South Africa is included below for noting:

				Half year 1 unaudited							Half year 2*
Logistics South Africa		2020		2019		%  change			2020		2019		%  change
Revenue (Rm)		7 426		6 470		15			6 493		6 385		2
EBITDA (Rm)		1 030		930		11			570		924		(38)
Operating profit (Rm)		632		553		14			94		512		(82)
Operating margin (%)		8,5		8,5					1,4		8,0
Return on invested capital (%)		13,4		11,9
Weighted average cost of capital (%)		8,8		10,0
Net debt including IFRS 16 - lease liability (Rm)		4 056		4 200		(3)
Net debt excluding IFRS 16 - lease liability (Rm)		2 362		2 251		5
Working capital (Rm)		(286)		535		(153)

 

				Full year unaudited
Logistics South Africa		F2020		F2019^		%  change
Revenue (Rm)		13 919		12 855		8
EBITDA (Rm)		1 600		1 854		(14)
Operating profit (Rm)		726		1 065		(32)
Operating margin (%)		5,2		8,3
Return on invested capital (%)		9,0		11,3
Weighted average cost of capital (%)		8,1		9,3
Net debt including IFRS 16 - lease liability (Rm)		4 436		3 585		24
Net debt excluding IFRS 16 - lease liability (Rm)		2 661		1 469		81
Working capital (Rm)		(626)		(116)

Note: Continuing operations, excluding businesses held for sale (mainly Pharmed), head office costs and eliminations.
^	Prior year numbers have been restated for the impact of IFRS 16 – Leases where applicable.
*	Half year 2 numbers are unaudited and derived from deducting the half year 1 results from the full year published results of 30 June 2020.

Logistics International (continuing operations)

Logistics International encompasses road freight, contract logistics, air/ocean and LLP activities outside of Africa - most notably our contract logistics and freight businesses in Europe and the UK.

Pro forma Logistics International region segment results

				Half year 1 unaudited							Half year 2*
Logistics International		2020		2019		%  change			2020		2019		%  change
Revenue (Rm)		8 982		9 229		(3)			9 633		9 630
EBITDA (Rm)		1 004		917		9			583		894		(35)
Operating profit (Rm)		372		315		18			(316)		273		(216)
Operating margin (%)		4,1		3,4					(3,3)		2,8
Return on invested capital (%)		4,1		6,0
Weighted average cost of capital (%)		5,6		5,8
Net debt including IFRS 16 - lease liability (Rm)		6 722		7 016		(4)
Net debt excluding IFRS 16 - lease liability (Rm)		3 679		3 296		12
Working capital (Rm)		687		456		51
Revenue (€m)		551		565		(2)			534		601		(11)
EBITDA (€m)		62		56		11			33		56		(41)
Operating profit (€m)		23		20		15			(15)		16		(194)
Operating margin (%)		4,2		3,5					(2,8)		2,7
Return on invested capital (%)		4,1		6,8
Weighted average cost of capital (%)		5,6		6,5
Net debt including IFRS 16 - lease liability (€m)		428		426
Net debt excluding IFRS 16 - lease liability (€m)		234		193		21
Working capital (€m)		44		28		57

 

				Full year unaudited
Logistics International		F2020		F2019^		%  change
Revenue (Rm)		18 615		18 859		(1)
EBITDA (Rm)		1 587		1 811		(12)
Operating profit (Rm)		56		588		(90)
Operating margin (%)		0,3		3,1
Return on invested capital (%)		0,5		3,7
Weighted average cost of capital (%)		5,3		6,0
Net debt including IFRS 16 - lease liability (Rm)		8 176		7 084		15
Net debt excluding IFRS 16 - lease liability (Rm)		4 459		3 634		23
Working capital (Rm)		(438)		506		(187)
Revenue (€m)		1 085		1 166		(7)
EBITDA (€m)		95		112		(15)
Operating profit (€m)		8		36		(78)
Operating margin (%)		0,7		3,1
Return on invested capital (%)		1,0		3,7
Weighted average cost of capital (%)		5,3		6,0
Net debt including IFRS 16 - lease liability (€m)		419		437		(4)
Net debt excluding IFRS 16 - lease liability (€m)		229		225
Working capital (€m)		(23)		33		(170)

Note: Continuing operations, excluding head office costs and eliminations.
^	Prior year numbers have been restated for the impact of IFRS 16 – Leases where applicable.
*	Half year 2 numbers are unaudited and derived from deducting the half year 1 results from the full year published results of 30 June 2020.

International

				Full year
		F2020		F2019^		%  change
Freight Management
Revenue (€m)		617		623		(1)
EBITDA (€m)		43		94		(55)
Operating profit (€m)				29		(100)
Operating margin (%)		(0,0)		4,6
Contract Logistics
Revenue (€m)		468		543		(14)
EBITDA (€m)		52		18		196
Operating profit (€m)		8		7		20
Operating margin (%)		1,8		1,3

Note: Continuing operations.
^	Prior year numbers have been restated for the impact of IFRS 16 - Leases where applicable.

Most impacted by the Covid-19 pandemic, revenue and operating profit from Logistics International decreased by 7% and 78% respectively in Euro terms. Revenue of c.€78 million was lost during the peak of Covid-19 as this business has significant exposure to the automotive and industrial sectors (c.65% of revenue), where the impact of the pandemic was most severe.

The high fixed cost base (c.50%) in this business, once-off impairments due to Covid-19 and low water levels in South America negatively impacted operating profit. The Rand performance was negatively impacted due to the translation of losses incurred in Q4 F2020 in Logistics International into Rands at significantly weaker exchange rates. The average exchange rate in Q4 F2020 was R19,77/Euro versus R16,50/Euro for the first nine months of F2020.

A marked decrease in volumes across most operations resulted in the operating margin declining to 0,7% from 3,1% in the prior year. Results for the 12 months were partially supported by the benefits of the significant cost-cutting initiatives in the prior year, contract renewals and new business gains of c.R2,5 billion (€128 million) per annum of annualised revenue.

Despite a marginal decrease of 1% in revenue, operating profit (in Euros) generated by freight management declined by 100% mainly due to a significant impact and related costs in road freight activities resulting from Covid-19-related restrictions and lower than expected results from the South American shipping business due to low water levels in H2 F2020 in addition to Covid-19-related restrictions on exports that impacted volumes.

Results in the freight business were supported by a good performance from our express palletised distribution business (Palletways) as corrective measures taken to eliminate costs, changing our pricing model to address the increased costs caused by network imbalances in the prior year and appointing additional members, reaped benefits. This despite Covid-19-related challenges in many of Palletways' markets.

The sale of the European shipping operations was concluded on 31 July 2020. The South American shipping business will continue to operate on a standalone basis and remains available for sale.

Contract logistics decreased revenue by 14% but increased operating profit by 20% (in Euros). Automotive contract logistics businesses most impacted as all original equipment manufacturers (OEMs) implemented plant shutdowns in March and April. Volumes in the chemicals-related businesses were less impacted, supported by new business gains, but still markedly lower than in the previous year.

As many countries in Europe have eased lockdown restrictions since June 2020 and OEMs in Germany are slowly returning to production, we have seen an increase in activity but still down from pre-pandemic levels. The recovery of Logistics International is very much dependent on the duration of the crisis and time taken to restore the broken supply chains - in addition to an already low-growth macro environment. All businesses in Logistics International are currently in operation, and while volumes remain impacted, there is a steady increase.

Net capital expenditure from continuing operations (excluding IFRS 16) of R267 million was incurred during the year mainly for warehousing equipment and the replacement of truck fleet.

The ROIC of 3,7% declined to 1,1% and is lower than WACC due to significantly lower profits caused by the negative impact of Covid-19.

Strategic progress and outlook

Covid-19 has presented an opportunity whereby clients have become keenly aware of their dependence on uninterrupted and resilient supply chains. From a sales perspective this is exciting for us. We have an open-ended opportunity to extract further efficiencies within clients' and principals' supply chains.

Our ambition is fuelled by our passion for our unique offering and a bold strategy. To be a leading logistics provider in Africa requires that we differentiate, that we optimise margins and develop unique world-class solutions founded in internal collaboration between different parts of the business and investment in smart technology and data. Management is focused, energised and eager to show results. Our 'One Imperial' aspiration will demand of us that we develop the controls and measures that drive integration and deliver business insights, transparency and one version of the truth; to optimise collaboration. We are working extensively to roll out the foundational systems and procedures of a singular client-facing entity are locking into place. Management is incentivised, aligned and empowered to deliver on this unique opportunity to grow our logistics solution to its full potential.