Results overview

Results overview

Imperial Logistics delivered an unsatisfactory operating performance, growing revenue from continuing operations by 6% and decreasing operating profit by 9%. Results were supported by a good performance from African Regions, offset by weaker operational performances, certain once-off trading costs of c.€4 million or 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%. Our balance sheet management remains sound with sufficient headroom in terms of capacity, together with good cash generation, for strategic growth.

  1. Further strategic rationalisation of the portfolio and restructuring post the unbundling resulted in the following:
    • The decision to exit the consumer packaged goods (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 Africa (excluding CPG) and International divisions from F2020 of c.R385 million p.a., with an associated once-off cost impact in F2019 of c.R170 million.
    • The impairment of certain historic goodwill to the value of c.R1,1 billion (c.14% of total goodwill and intangible assets; excluding CPG) 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.
  2. Imperial Logistics' renewal rate across our divisions on existing contracts remains in excess of 90% with an encouraging pipeline of new opportunities supported by an excellent new contract gain rate. New business revenue of R5,6 billion was secured during the past year.
  3. Revenue* generated outside South Africa increased 9% to R36,6 billion (74% of group revenue) and operating profit* generated outside South Africa decreased by 11% to R1,6 billion (63% of group operating profit), largely impacted by once-off costs in Logistics International.
  4. A full reconciliation of earnings to headline earnings is provided in the group financial performance section.
  5. 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.
  6. Net capital expenditure of R1,1 billion was in line with depreciation and increased from R517 million in F2018 mainly due to higher investment in fleet expansion (as a result of new contract gains) and replacement in Logistics South Africa, and specialised new fleet acquired in Logistics International. Furthermore, F2018 net capital expenditure benefited from property disposals (R260 million).
  7. Total net debt increased marginally by 1% compared to June 2018.
  8. Free cash flow (post-maintenance capex and including CPG) increased to R1,4 billion from R1,3 billion.
  9. 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).
  10. Motus unbundling: The unbundling of Motus was concluded in November 2018 and Motus is thus presented as a discontinued operation in this set of results for the four months ended 31 October 2018, where stipulated. The fair value of the distribution of R17 billion exceeded the net carrying value of Motus at 31 October 2018, resulting in the recognition of a fair value gain of R4,3 billion in the income statement.
  11. The tangible benefits of the above actions will be realised from the 2020 financial year, with the ultimate objective of unlocking value for our shareholders.

* Excluding discontinued operations and businesses held for sale.

Operating context

Imperial Logistics' activities for continuing operations on the African continent produced 51% and 69% of revenue and operating profit respectively during the year to June 2019, with the remainder generated mainly in Europe and the United Kingdom. Trading conditions in the business' diverse markets remain challenging.

South Africa*

In total, R13,1 billion or 27% of group revenue and R939 million or 38% of group operating profit was generated by the division in the year to 30 June 2019. Material macroeconomic factors affecting our South African operations included persistently poor economic conditions, low consumer spending, and fuel price volatility – all of which translated into exceptionally low volumes across most sectors. Load shedding during the year impacted production activity in many sectors, which also negatively affected our volumes. Government's growth plan is unlikely to stimulate growth in the short term and high unemployment continued to plague the country. We continued to face margin pressures from clients.

The impact of this lacklustre trading environment on operating profit has been reduced volumes, and ongoing competitive and client pressures, particularly in the consumer-facing, healthcare and manufacturing client base.

Rest of Africa

Our primary positioning as a leading distributor in the healthcare and consumer space stood us in good stead in the Rest of Africa where R12,1 billion or 24% of group revenue and R787 million or 31% of group operating profit was generated in the year to 30 June 2019, despite subdued growth and lower-consumer spending in certain countries of operation.

Our businesses in Nigeria, Ghana, Kenya and Mozambique performed well during the year. Factors negatively impacting performance included a slower than expected economic recovery and parallel imports of pharmaceuticals in Kenya; the ongoing economic recession in Namibia; and the economic crisis in Zimbabwe which resulted in lower inbound consumer goods volumes and outbound commodities volumes that negatively impacted our managed solutions business.

Notwithstanding these mixed trading conditions across the continent, African Regions delivered a good performance, increasing revenue and operating profit for the financial year 2019.

Eurozone and United Kingdom (UK)

Our International operations generated R24,5 billion or 49% of group revenue and R775 million or 31% of group operating profit in the year to 30 June 2019. In Europe, certain sectors in which we operate – such as steel, manufacturing and automotive – remain under pressure with the threat of US tariffs resulting in reduced exports. In our largest market, Germany, the lowest manufacturing data recorded in seven years, a decline in industrial production and declining business confidence have raised the risk of a recession. One of the main challenges resulting from the current low unemployment rates is finding highly skilled people to work in the logistics industry and the division felt the ongoing pressure of these strong labour market conditions – which drove higher wage growth in some areas during the year under review.

In F2019, changing weather patterns resulted in the lowest water levels on the River Rhine in Germany in recorded history, which in turn negatively impacted our shipping operation. While water levels have since recovered, we believe this to be a structural change and have accordingly implemented measures to mitigate this impact. The prolonged impact of the implementation of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) resulted in significantly lower vehicle production volumes in Logistics International's automotive business during the year.

In the UK, Brexit increased economic and political uncertainty, depressing consumer demand and activity, and consequently affecting the performance of the express palletised distribution business (Palletways).

* Includes head office and eliminations.

Divisional performance

Logistics South Africa – Continuing only  HY1 
on HY1 

on HY2 
   2019           2018    
Revenue (Rm) 6 737           6 790     (1)    6 637           6 394        13 374           13 376          
EBITDA (Rm) 725           727           651           694     (6)    1 376           1 421     (3)   
Operating profit (Rm) 505           507           445           480     (7)    950           987     (4)   
Operating margin (%) 7,5           7,5           6,7           7,5           7,1           7,4          
Return on invested capital (%) 12,2           13,4                                   13,0           13,8          
Weighted average cost of capital (%) 10,9           11,1                                   10,8           11,0          
Net debt  2 058           2 280     (10)                            1 491           2 241     (34)   
Net working capital  762           785     (3)                            302           793     (62)   

* Restated due to the reallocation of results relating to our infrastructure solutions business from Logistics South Africa to Logistics African Regions.

Note: Continuing operations; excluding businesses held for sale, head office and eliminations.

Logistics South Africa, excluding CPG and businesses held for sale, maintained revenue compared to the prior year and reduced operating profit by 4% in a difficult, low-growth and increasingly competitive trading environment. Performance was negatively impacted by depressed consumer demand and exceptionally low volumes across most industries – particularly in the consumer-facing, manufacturing and healthcare client base. Challenging market conditions have been further exacerbated by load shedding, fuel price volatility, lower consumer spending and higher unemployment.

Results were supported by new contract gains (c.R2,2 billion annualised revenue) and good performances from the supply chain management and consulting (Resolve), fuel and gas, and commodities businesses, which increased revenue and operating profit.

All businesses were rationalised resulting in improved efficiencies and significantly reduced costs, as we continued to face margin pressure from clients.

The CPG business, classified as a discontinued operation in this financial year, was significantly impacted by lower volumes, loss of contracts and increased cost and margin pressures from clients, resulting in a R503 million operating profit loss for the year. During the CPG closure process we will consider the interests of staff, clients and other key stakeholders. Excluding the CPG business, the South Africa division has grown operating profit by 5% p.a. over the last three years, achieving a ROIC of 16%. Its margins have improved from 5,8% in F2018 to 7,1% this year. This demonstrates its resilience in a low-growth environment.

Net capital expenditure increased from R388 million in the prior year to R569 million and comprised mainly of expanding the fleet to accommodate new contracts and replacement of transport fleet.

The ROIC of 13,0 % reduced from 13,8% in the prior year mainly due to lower operating profit and is currently below the target hurdle rate of WACC +3%.

Logistics African Regions  HY1 

on HY1 


on HY2 
   2019           2018    
Revenue (Rm) 6 339           5 385     18     5 766           5 076     14     12 105           10 461     16     
EBITDA (Rm) 511           469        373           403     (7)    884           872        
Operating profit (Rm) 465           401     16     322           325     (1)    787           726        
Operating margin (%) 7,3           7,4           5,6           6,4           6,5           6,9           
Return on invested capital (%) 17,8           20,8                                   16,2           17,5           
Weighted average cost of capital (%) 14,2           8,2                                   15,4           11,1           
Net debt   1 161           1 896     (39)                            836           635     32     
Net working capital   1 564           1 004     56                             1 182           1 206     (2)    

* Restated due to the reallocation of results relating to our infrastructure solutions business from Logistics South Africa to Logistics African Regions.

Note: Continuing operations; excluding businesses held for sale.

Logistics African Regions delivered a good performance, increasing revenue and operating profit by 16% and 8% respectively, despite mixed trading conditions across the region.

Operating margin decreased from 6,9% to 6,5% due to a significantly weaker performance in the managed solutions business mainly in the second half of F2019. The healthcare distributorship segment recorded higher volumes but lower operating margin mainly due to a change in the product mix, while the consumer distributorship segment maintained operating margin during the year.

The healthcare distributorship segment delivered excellent results, supported by a strong performance from our business, in West Africa – where we continue to operate as the leading distributor of pharmaceuticals in Nigeria – and market share gains in Ghana. Surgipharm also contributed positively, growing revenue and operating profit, despite its performance being hindered by parallel imports and the slow economic recovery in Kenya. The division also signed its first pharmaceutical client for our multi-market aggregation model (Simplified Solutions in Healthcare). Our healthcare sourcing and procurement business, Imres, increased revenue and operating profit, benefiting from a strong order book and long-term contract gains. Results were also boosted in our infrastructure solutions business by substantial donor aid market project work undertaken in the first half. Ongoing operational initiatives in our healthcare businesses include the on-boarding of new principals, increasing market share on existing principals and the expansion of product categories to diversify the portfolio.

Significant new contract gains (c.R1,3 billion annualised revenue) were secured during the year.

Our consumer business performed well, supported by good performances in Mozambique and Namibia, despite ongoing recessionary conditions in Namibia. The acquisition of CB Enterprises, a healthcare consumer business in Namibia, also contributed positively.

The managed solutions business was negatively impacted by lower chrome volumes, challenging economic conditions in Zimbabwe which led to lower cross-border activity, and substantially lower volumes from global aid organisations mainly as a result of the loss of a large public health contract reported on previously.

Net capital expenditure of R16 million was incurred during the year. The comparative year’s capital expenditure was reduced significantly by property disposals (R216 million).

ROIC at 16,2% remains healthy but declined from 17,5% mainly due to the normalisation of average working capital, including higher inventory levels.

  HY1       HY1  
on HY1 
  HY2       HY2  
on HY1 
Logistics International  2019           2018        2019           2018        2019           2018    
Revenue (€m) 760           733        757           780     (3)    1 517           1 513            
EBITDA (€m) 40           44     (9)    40           61     (34)    80           105     (24)     
Operating profit (€m) 24           27     (11)    24           44     (45)    48           71     (32)     
Operating margin (%) 3,2           3,7           3,1           5,6           3,2           4,7            
Revenue (Rm) 12 412           11 592        12 128           11 608        24 540           23 200         
EBITDA (Rm) 650           705     (8)    647           909     (29)    1 297           1 614     (20)     
Operating profit (Rm) 402           434     (7)    373           650     (43)    775           1 084     (29)     
Operating margin (%) 3,2           3,7           3,1           5,6           3,2           4,7            
Return on invested capital (%) 9,8           8,3                                   7,1           9,6            
Weighted average cost of capital (%) 7,3           5,4                                   7,6           6,3            
Net debt    200           384     (48)                            226           195     16      
Net working capital    31           21     48                             34           14     143      

Note: Continuing operations; excluding businesses held for sale.

Logistics International delivered an unsatisfactory result with revenue in Euro maintained in comparison with the prior year while operating profit declined by 32%. Revenue increased by 6% and operating profit decreased by 29% in Rand which was 5% weaker on average against the Euro during the year.

Performance was negatively impacted by significant once-off costs incurred during the year resulting from the material business restructuring (c.€9 million) and the prolonged impact of the implementation of WLTP (c.€4 million) that resulted in significantly lower vehicle production volumes in the automotive business. Excluding the once-off costs, operating profit in Euro decreased by 9% year on year.

The shipping business performed well during the year. Despite the European inland shipping business being negatively impacted by the lowest water levels in recorded history in H1 F2019 the impact was largely mitigated by the business increasing freight rates in the chemical fleet and receiving partial compensation from customers due to additional costs incurred.

Lower volumes and higher costs in the automotive, retail, steel, chemicals and industrial segments, resulting from macroeconomic challenges, further hampered performance as these cost increases could not be passed through to clients, negatively impacting margins. While the Road Liquid business benefited from increased volumes subsequently shifting from river to road, profitability was lower due to higher costs incurred.

Results for the year were supported by contract renewals and new business gains (c.R2,1 billion annualised revenue) mainly in the automotive segment.

Palletways continues to contribute positively and good progress has been made in appointing additional members and changing our pricing model to address the increased costs caused by the network imbalances. Despite lower operating profit in F2019, the business’ cash generation remains higher than its pre-acquisition performance.

Net capital expenditure of R413 million increased from R373 million in the F2018 and included the replacement of specialised chemical and gas fleet.

The ROIC of 7,1% declined from 9,6% due to a weaker trading performance and the impact of once-off effects, and is currently below the target hurdle rate of WACC +2%.

Group financial performance

Group profit or loss (extracts)

Rm June
CONTINUING OPERATIONS                          
Revenue  49 720           48 565        
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           (33)          

~ Restated for discontinued operations (CPG).

* Calculated on profit before tax, excluding other non-operating items and income from associates.

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 in Logistics International.

The R265 million decrease in profit before tax to R1 709 million (before exceptional items) is attributed to:

  • The decrease in operating profit, offset by the decrease in net finance cost of R154 million.
  • The decrease in net finance cost was aided by the once-off gain of R63 million on 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 that arose on the redemption of the preference shares and the favourable remeasurement of the put option liabilities of R51 million.

The profit from discontinued operations comprises Motus and CPG.

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 

Earnings per share 1 775      1 681   
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 

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    
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.

The major variances on the financial position at 30 June 2019 compared to 30 June 2018 are explained as follows:

  • Goodwill and intangible assets decreased 19% as a result of goodwill impairments of R1,1 billion and the amortisation of PPA intangibles of R400 million. Significant deterioration in macroeconomic conditions in all three divisions, which include a depressed growth outlook, uncertainty and higher WACC rates in certain territories has driven the decision to impair certain historic goodwill to the value of c.R1,1 billion (c.14% of total goodwill and intangible assets; excluding CPG). These factors have resulted in the reduction in the value in use of certain of our cash-generating units, 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.
  • 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 transport fleet, increased as a result of investment in 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 favorable 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 036 million. The dividend outflows were offset by comprehensive income of R3 890 million including R200 million received from Afropulse in relation to the BBBEE transaction.

The following details the changes in equity during the year:


Rm June 
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 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.

The following are the significant cash flow items, excluding Motus:

  • Cash generated by operations of R2 065 million increased by 46% compared to the prior year of R1 419 million.
  • Net working capital was well managed, resulting in a net cash outflow of only R16 million.
  • Net capital expenditure increased to R1 094 million 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.
  • 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.
  • The cash flow benefited from R200 million that was raised from the Afropulse BBBEE transaction and proceeds of R226 million from the sale of Gruber.
  • Free cash flow, post maintenance capex and including CPG, increased to R1 442 million from R1 305 million in F2018 resulting in continuing free cash flow to continuing headline earnings ratio of 1,40 times.

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.


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.


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.


  1. Simplifying our strategic positioning

    Since the unbundling of Motus in November 2018, we undertook a further strategic evaluation process to simplify our strategic positioning. This led to further rationalisation of our portfolio, restructuring and reducing costs - with the ultimate objective of unlocking value for our shareholders. Through our renewed strategy we have defined our immediate and ongoing strategic priorities and focused the collective energy of the business on achieving them.

    As such, the core strategic focus of Imperial Logistics is to grow our African business and align our International portfolio to position the group as the "gateway to Africa" in the medium term. An integrated logistics and market access offering focused on Africa, leverages our powerful competitive advantages and capabilities, which will be concentrated mainly on the healthcare, consumer, chemicals, industrial and automotive industry verticals. From this focal point, our scope will extend to other emerging and selected developed markets, based on the relevance of our capabilities, scale benefits and client relationships.

    Our unique African Regions network and capabilities make us an attractive strategic partner to multinational clients. Through leveraging this competitive advantage and refocusing our International portfolio, we are able to cross-sell our service offerings across our targeted regions.

    Our strategic objectives in the short term are:

    • Continue to grow in Africa, adding new capabilities, entering new industry verticals and serving more countries/regions. We are accelerating our growth in Africa by building on our existing competencies and expanding into new capabilities. We will focus on strategically aligned industries and invest in existing and new geographies that complement our capabilities, industries and client base. This will enable us to enhance our service offering and drive revenue growth opportunities. We will add impetus to our drive to position Imperial Logistics as a strategic partner that provides a "gateway to Africa" for companies seeking access to the continent's fast-growing markets and we will further invest in strategic partnerships which will enable us to evolve and intensify our engagement with our clients.

      In support of our clients' growth aspirations, demand generation, light contract manufacturing and brand partnership are among the capabilities we will expand into the Rest of Africa. Leveraging our extensive expertise in healthcare, we are also looking at adding sourcing and procurement to other industries. We are exploring new regions in which to leverage our distributor capabilities in pharmaceuticals and consumer goods, as well as opportunities to expand these competencies in our existing geographies.

    • Strategically align our International portfolio with our core competitive advantage, being Africa. The Logistics International portfolio is under review and could result in further disposals of non-core assets and investment in new areas that support our Africa growth strategy.

    Our strategic objectives, which will be executed through a phased approach, are:

    • Invest in international freight management (IFM) capabilities – through acquisition, partnerships or building these ourselves – will enable Imperial Logistics to offer global coverage to support African trade flows. This will likely entail the acquisition of an existing IFM network with a well-established presence in key markets.
    • Invest in capabilities outside Africa that support the growth of target industry verticals in Africa mainly in healthcare, consumer, chemicals, industrial and automotive. In growing our target industry verticals we will invest in capabilities in select new emerging and developed markets. We will leverage expansion opportunities with multinational clients that recognise us as emerging market or specific industry specialists and likewise leverage our proven capabilities to expand into new emerging markets such as the Middle East, Eastern Europe, India, where trade growth with Africa continues to expand.
    • Expand our distributor capability geographically, augmenting our existing competencies and adding new capabilities will, over time, create cross-selling and up-selling opportunities. Our plan is to access local experience and adequate scale through selective acquisition. We will initially focus on the healthcare and consumer industries but will consider opportunities in new industries and geographies where relationships can be leveraged and in order to meet the needs of our multinational clients.
  2. Progress against strategy

    Significant progress in achieving strategic clarity, confronting and resolving longstanding impediments to delivery, and developing differentiated solutions in carefully selected industries across our regional businesses has been recorded in the 2019 financial year.

    Each division remained focused on the rationalisation of their portfolios, improving efficiencies and significantly removing costs – the benefits of which will be fully realised from the 2020 financial year.

    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.

    Our strategic objectives will be further enabled by the priority we are giving to strengthening the commercial mindset within the group, improving our people practices and systems, and accelerating strategic innovation. To this end, we have recently appointed highly experienced industry experts as chief commercial officers in our South African and International divisions, and global heads for each of our target industry verticals.

    We have simplified our market disclosure, introducing secondary segmental disclosure in this set of results according to our three core capabilities per region – being distributorships, contract logistics and freight management – and we continue to disclose revenue generated by industry per region.

    Driving innovation also remains a critical enabler to our strategy to ensure that we remain competitive, relevant to our clients and well-positioned to address industry disruptors from a technology perspective. We have therefore established an innovation fund which will enable us to invest effectively in high-growth potential start-up projects within the supply chain and logistics technology stack.

    Divisional strategic progress is highlighted below:

    South Africa

    In South Africa, our efforts to rationalise, cut costs and unlock value have included exiting unprofitable contracts, consolidating operations and properties, and reducing fleets and overheads. Despite numerous turnaround and cost-cutting initiatives, our CPG business continued to make losses. After a detailed strategic evaluation of the business, we concluded that future returns were unlikely to exceed the cost of capital due to structural changes in the CPG market. With the business model having become uncompetitive and unsustainable, we decided to exit the business. The board approved this decision on 30 May 2019. It is important to note that this decision does not represent our exit from the consumer industry vertical in South Africa, but only the rationalisation of the multi-principal distribution capability that had become unviable. We feel a great responsibility towards our people, clients and suppliers and we will therefore consider the interests of all our key stakeholders during this process. Key contracts are being accommodated in other business units under a different commercial model. The CPG operations will be fully terminated by the end of September 2019. Excluding the CPG business, the South Africa division has grown operating profit by 5% p.a. over the last three years, achieving a ROIC of 16%. Its margins have improved from 5,8% in F2018 to 7,1% this year. This demonstrates its resilience in a low-growth environment.

    The South African division removed c.R140 million (excluding CPG) of fixed overhead costs per annum which resulted in a once-off cost impact of c.R25 million in this financial year.

    Excluding CPG, and despite a challenging trading environment, our pipeline of new opportunities remains healthy. In South Africa, we have added R2,2 billion of annualised revenue in the past 12 months and retained 95% of client contracts. To further support our client-centric approach and optimise our core capabilities, the division continues to reorganise its operating model by target industries and will drive organic revenue growth through a combination of asset-light expansion and asset-intensive investments that yield the required returns.

    Significant progress has been made in accelerating transformation (race and gender) over the past year with a number of key black and female executive and management appointments made in our South African business. Furthermore, the broad-based black economic empowerment (BBBEE) transaction with the Afropulse Group Proprietary Limited (Afropulse) – a wholly black women-owned business – to form Imperial Logistics Advance was concluded 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.

    African Regions

    The division continued to expand its multi-market aggregation strategy – delivered through its Simplified Solutions in Healthcare model – that effectively provides multinational clients with distributor solutions in healthcare for the small to mid-size markets of sub-Saharan Africa. Notably, a new contract was awarded to the division by one of the world's largest pharmaceutical companies, MSD (known as Merck & Co Inc, in the United States and Canada), and will see Imperial Logistics handling the distribution and promotion of MSD products into selected African markets.

    The division continued to exploit growth opportunities that complement and expand its existing footprint in the healthcare and consumer verticals with contract gains recorded in both industries. It will likewise continue to leverage targeted acquisitions and strategic partnerships with clients – expanding capabilities and services as required to enhance service offering, geographical reach and drive revenue opportunities.


    Through a significant rationalisation and cost reduction process, which mainly included the consolidation of head offices and support functions, the International division extracted c.€15 million per annum (c.R245 million) of fixed overhead costs, which resulted in a once-off cost impact of c.€9 million (c.R145 million) in this financial year.

    We are reviewing our Logistics International portfolio to align it to our strategic direction and core competitive advantages. To this end, we are considering the disposal of our shipping business in Europe (including South America). While this business is profitable and meets our hurdle rates, it is non-core to our strategy. It cannot be scaled further in our target markets (centred in Africa) and the significant capital expenditure it requires to participate in the growth opportunities would be better deployed elsewhere to facilitate our strategic growth plans. Further disposals of non-core and low-return on effort businesses in the short to medium term will be considered in this region.

    The expansion of specific capabilities through strategic acquisitions and portfolio enhancement – including the potential expansion into IFM – is in progress, and the market will be informed as and when any material opportunities are concluded.

Governance matters

  1. Remuneration policy

    At the annual general meeting held on 30 October 2018 less than 75% of shareholders voted in favour of the implementation of Imperial's remuneration policy. The remuneration committee has since engaged with stakeholders and conducted a detailed review of the group's remuneration policy and its implementation. The committee subsequently made material changes to Imperial Logistics' remuneration policy and its implementation, which are summarised below:

    • Annual deferred bonus plan (DBP) which was not linked to performance conditions has been replaced with conditional share plan (CSP), which is subject to the same performance conditions as share appreciation rights (SAR). These conditions incentivise long-term sustainable performance.
    • Performance conditions applicable to long term incentives (LTI) are now being disclosed (refer to 5 December 2018 SENS).
    • All LTI scheme rules were amended to provide for reduction or forfeiture of scheme benefits in certain defined circumstances.
    • Executive's short-term incentive (STI) conditions have been revised to link performance conditions with the group's strategy and disclose these for each executive.
    • The discretionary component of STI performance conditions was reduced.
    • Transformation-related targets remain an important component of incentives.
    • Minimum shareholding requirements have been introduced for executives and prescribed officers effective 1 July 2019 with a phasing in over a period of five years.
    • The group undertakes regular benchmarking of the remuneration packages of the Chief Executive Officer (CEO), Chief Financial Officer (CFO) as well as other executives and senior staff members.

    We are of the view that the resulting policy aligns the interests of shareholders and the executives, and supports long-term sustainable value creation in the group aligned with its strategy.

    A more comprehensive remuneration and governance update will be provided in the integrated annual report 2019.

  2. Directorate changes

    As previously announced, Mr Marius Swanepoel retired as CEO of Imperial Logistics on 1 February 2019 and Mr Mohammed Akoojee succeeded him on the same date. Mr Swanepoel continued to serve as an executive director until his retirement on 30 June 2019. The board thanks Mr Swanepoel for his invaluable contribution in shaping the business over the years.

    Ms Bridget Radebe and Mr Dirk Reich will be appointed as independent non-executive directors, effective 1 September 2019.

    Ms Radebe, a qualified chartered accountant, is the Chief Financial Officer of African Rainbow Capital Investments Limited and also serves on the board of Alexander Forbes Group, A2X and Colourfield Liability Solutions. Ms Radebe previously served as a partner at Deloitte where she serviced JSE-listed clients including Imperial Holdings Limited.

    Mr Reich, a global logistics industry expert, holds an MBA and serves on the boards of DFDS, Skycell, Instafreight, Log-hub and IPT. He previously served as the CEO of Cargolux Airlines International, on the management board of Kuehne & Nagel and as a non-executive director on the board of Panalpina. In 2016, he founded R&R International Aviation which offers strategic advice in the fields of aviation, logistics and e-commerce in China.


The strategic portfolio rationalisation, cost-cutting initiatives, organisational restructure and key decisions taken will have far-reaching benefits for our business and its stakeholders.

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 divisions. 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 the prior year.
  • Low double-digit operating profit growth compared to the prior year.
  • Low double-digit growth in continuing HEPS compared to the prior year.
  • Ongoing strong free cash flow conversion of c.70%.

The balance sheet of the business remains strong, with sufficient headroom in terms of capacity and liquidity to facilitate our strategic growth aspirations. Our disciplined capital allocation approach will prioritise investment in businesses with strong organic growth and cash flow profiles that are strategically aligned, enhance our key competitive advantages and meet our financial hurdle rates.


Despite the disappointing F2019 financial and operational performance, we remain confident that the bold strategic decisions taken to refocus the business will reap real benefits from the 2020 financial year. The business remains sharply focused on delivery against clearly defined strategic, operational and financial objectives and is deeply committed to creating sustainable value for all its stakeholders.

We would like to thank our board, shareholders, funders, employees and all other stakeholders for their ongoing support during the difficult times. Thank you for your patience, your contribution and your confidence in the path that we have taken to ensure Imperial Logistics' relevance and to retain our competitive edge and unlock value. Imperial Logistics is well-placed and strategically positioned to deliver on our stated targets and objectives going forward.

Mohammed Akoojee
Chief Executive Officer

George de Beer
Chief Financial Officer

27 August 2019

The forecast financial information herein has not been reviewed or reported on by Imperial Logistics' auditors.

Declaration of interim ordinary dividend

For the year ended 30 June 2019 notice is hereby given that a gross final ordinary dividend in the amount of 109,00 cents per ordinary share has been declared by the board of Imperial Logistics, payable to the holders of the 201 242 919 ordinary shares. The dividend will be paid out of retained earnings.

The ordinary dividend will be subject to a local dividend tax rate of 20%. The net ordinary dividend, to those shareholders who are not exempt from paying dividend tax, is therefore 87,20 cents per share.

The company has determined the following salient dates for the payment of the ordinary dividend:

Declaration date Tuesday, 27 August  
Last day for ordinary shares to trade cum ordinary dividend Monday, 23 September  
Ordinary shares commence trading ex ordinary dividend Wednesday, 25 September  
Record date Friday, 27 September  
Payment date Monday, 30 September  

The company's income tax number is 9825178719.

Share certificates may not be dematerialised or rematerialised between Wednesday, 25 September 2019 and Friday, 27 September 2019, both days inclusive.

RA Venter
Group Company Secretary

27 August 2019