Chairman’s letter to stakeholders
The world and South Africa has, since my 2020 report, evolved. Whilst we still find ourselves in the middle of a pandemic, we have learnt to live with it whilst attempting a return to 'normality', which has included a return to work and school, international travel, albeit at a limited degree, increased face-to-face interactions and meetings. The debates on vaccination policies and work models (hybrid or legacy) are squarely on the table for many corporates and institutions. Despite the unpredictable impact of COVID-19 on our lives and businesses, the mood overall in 2021 has certainly been more optimistic and uplifting.
Chairman and non-executive director
The impact of COVID-19 has continued to be felt within our business. It is, however, pleasing to note that we have seen much reduced rates of mortality amongst our ranks and reductions in the number of infections. The proactive stance taken by the executive team of ensuring the safety and encouraging the early vaccination of our people, who by delivering products and services, are in the most vulnerable position of contracting the disease, has borne fruit.
Heightened engagement with employees through various digital and other platforms has enabled us to support those who continue to work from home, others who are in isolation as a result of contracting COVID-19 and those battling to cope with mental health, loss of loved ones and the devastation COVID-19 has caused to livelihoods. As a business, we have continued to be vigilant in enforcing stringent COVID-19 protocols and are working tirelessly to encourage our people to protect themselves, their families and colleagues by choosing to be vaccinated. As leaders, it is of paramount importance to encourage all in our ranks to vaccinate to assist in the economic revival of South Africa and other key markets of operation.
However, what has been concerning particularly in 2021, has been the glaring disparity in access to COVID-19 vaccinations with developed and wealthy nations outpacing most parts of the world in terms of access and supply. A key concern is highlighted in numerous World Health Organization (WHO) reports, which show that developed and wealthy countries have in the main exceeded the 50% mark to vaccinate their citizens, whereas most developing nations, especially on the African continent hover at levels below 10% in the main. A further concern is the impact of this disparity on the economic revival of economies in Africa, if the matter of equitable access is not addressed by all global leaders.
As a company with operations in more than 25 countries, Imperial wasn't spared the impact of an uncertain, volatile and to a large extent, unpredictable business environment. While, we had adapted to the 'new' operating environment and the impact of COVID-19 on the business, the impact of the second and third waves of the pandemic had an adverse impact on the ability to predict demand and consumer behaviour. While necessary, the changes to level 3 from level 2 and level 1 over the festive season and during parts of 2021 were highly disruptive to our business operations, mainly in South Africa.
Against this background, it was pleasing that in the 2021 financial year, the business delivered double-digit growth in revenue, EBITDA and operating profit. The significant uplift in our total headline earnings per share (HEPS) and continuing core EPS (CEPS) numbers by more than 200% cements a solid performance by the business. This performance was further underpinned by exiting loss-making businesses, restructuring certain businesses in Logistics Africa, which yielded an annualised R200 million saving in costs and improved operating margin from continuing businesses from 3,1% in 2020 to 4,5%.
Imperial has had one of its most active years in mergers and acquisitions (M&A) this past financial year, culminating in the announcement of the strategic acquisitions of J&J, Deep Catch and the sale of the European and South America shipping businesses. These acquisitions were in line with the stated strategic intent of being a 'Gateway to Africa' while expanding the geographic footprint and adding new capabilities to the business.
Last year we unveiled and set in motion our refined strategic focus as listed below. I am pleased to provide an update on our progress with more detail found in the CEO's review and throughout the integrated report.
- Operate as 'One Imperial'.
- Invest in people as our greatest asset.
- Serve as a 'Gateway to Africa'.
- Leverage our international footprint and expertise.
- Go digital, be digital, enable digital.
- Integrate ESG practices.
It has been pleasing to note the significant progress we have made in embedding the strategic focus across the organisation. This is reflected in the new operational and business reporting model shared last year enabling us to operate as 'One Imperial'. Extensive work has been done in ensuring that our people offering is world class, easily accessible and powered by technology.
As a business operating in a 'new normal', which is faced with new disruptors and disruptions, our focus on digital through investment and acquisition and embedding a culture of doing business differently, have accelerated the adoption of digital in our business. In keeping with a world vision of a better future for future generations, the extensive work done in addition to new projects underway, which anchor our ESG strategy, has demonstrated our commitment to people, profits and the planet.
DP World transaction
The announcement of the proposed acquisition of Imperial by DP World in July 2021 and the subsequent approval by shareholders on 17 September 2021 spells the possibility of a new dawn for the company and her people, if implemented. We look forward to working together with DP World to successfully conclude this milestone transaction.
We believe that the proposed transaction supports Imperial's 'Gateway to Africa' strategy and, underpinned by a strong parent with extensive experience on the African continent and other parts of the globe, will accelerate our ambitions, if implemented. From a shareholder perspective, the transaction, which has been priced at a c.39.5% premium to the day ahead of the firm offer announcement, provides an opportunity to further unlock value.
The world and society continue to show their resilience despite the ravaging impact of the pandemic. From a South African perspective, our fortunes and indeed how we are perceived by the world, were negatively affected by the three weeks of riots that gripped mainly KwaZulu-Natal and Gauteng in July 2021. While many views have been posited about the cause of the riots we have, as a business and investment destination, lost ground and shine. The positive response by business to rebuild and the actions of government to quell the riots and restore order, have been a beacon of light in this sad episode.
As business, government and society, it has become more imperative than ever that we work together to ensure a just and equitable society. We must continue to fiercely protect our democracy and ensure that those elected to serve in government lead and serve the people of South Africa with heart, honesty and dedication.
During the year under review, we welcomed the appointments of Mrs Henrietta (Bola) Adesola and Mrs Juliet Anammah as independent non-executive directors with effect from 22 February 2021. Their appointments were to ensure that we brought on board individuals with extensive business experience, primarily in the African continent.
More detail on how we implement governance is provided in our governance of this integrated report.
The demands of 2021 have been unprecedented, requiring greater effort to steer the ship, focus on the strategy and deliver a solid set of results. Our sincere appreciation as a board, to Mohammed Akoojee, our group CEO; George de Beer, our group CFO; members of the group executive committee and the employees of Imperial.
As we look to a return to 'normality', it is not taken for granted that 24 of our colleagues and members of families of colleagues have succumbed to COVID-19. Our deepest condolences to you and your families.
I thank all our stakeholders, including our shareholders, who are always available to engage with us constructively on key matters that impact our business and our society. Your guidance on key matters such as remuneration and ESG among others has provided us with tools to navigate and deliver on these key areas.
I also extend a special thank you to Graham Dempster, as the chairman of the independent board and board colleagues who serve on the independent board, for your unfailing hard work in steering the pending DP World transaction.
Lastly, sincere appreciation to members of the board, who have continued to be a sounding board, sage advice and as a pillar of support to me, as chairman, to Mohammed and his team, and Imperial as a whole.