Preliminary summarised results
for the year ended 30 June 2020

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, including cross-selling and upselling opportunities with our market access business.

In an already difficult, low-growth and increasingly competitive trading environment – exacerbated by the impacts of Covid-19, Logistics Africa recorded revenue growth of 3% but operating profit declined by 34%. Results were negatively impacted by Covid-19-related trading restrictions, associated once-off costs from further restructuring to reduce costs, and lower margins in the healthcare businesses in South Africa. Results were supported by new contract gains of c.R2,0 billion annualised revenue, the benefit of cost-saving initiatives undertaken in F2019 and excellent cost management during Covid-19. This business will also benefit from further cost reduction initiatives of c.R200 million planned in F2021.


Pro forma Logistics Africa segment results

  Half year 1 unaudited       Half year 2*       Full year unaudited    
Logistics Africa   2020  2019 
change 
    2020  2019 
change 
    F2020  F2019^
change 
 
Revenue (Rm)   8 016  7 407      6 856  7 048  (3)     14 872  14 455   
EBITDA (Rm)   1 075  959  12      601  1 011  (41)     1 676  1 970  (15)  
Operating profit (Rm)   658  616      109  548  (80)     767  1 164  (34)  
Operating margin (%)   8,2  8,3        1,6  7,8        5,2  8,1     
Return on invested capital (%)   14,1  12,8                  9,0  12,7     
Weighted average cost of capital (%)   9,2  10,2                  8,1  9,8     
Net debt including IFRS 16 – Lease liability (Rm)   4 016  3 636  10                4 436 3 585  24   
Net debt excluding IFRS 16 – Lease liability (Rm)   2 308  2 067  12                2 461  1 469  81   
Working capital (Rm)   (285) 644                  (626) (116)    
^ 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.

Note: Continuing operations, excluding head office costs and eliminations.

Full year*
Logistics Africa 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 
^ Prior year numbers have been restated for the impact of IFRS 16 – Leases where applicable.
* Unaudited.

Note: Continuing operations.

The lockdown restrictions resulted in a decline in volumes across most sectors – particularly in tobacco, alcohol and fuel. As a result, operating margin decreased to 5,2% from 8,1% in F2019. Performance for the year was also adversely impacted by the absence of project work in Africa – which tends to be cyclical – and was included in the prior year.

Revenue and operating profit in the freight business declined by 4% and 23% respectively. The performances of our LLP and road freight businesses were subdued by the lower demand and volumes mainly relating to Covid-19. Significantly lower volumes due to cross-border travel restrictions and increasingly poor economic conditions in Zimbabwe, negatively impacted the cross-border freight business.

Contract Logistics increased revenue by 15%, benefitting from the retention of CPG contracts that are now operating under more viable commercial terms, and increased demand from healthcare and consumer clients. Operating profit declined by 51% due to the impact of trading restrictions in certain sectors and associated once-off costs mainly due to restructuring and to reduce costs. The healthcare business in South Africa also negatively impacted results due to contract renewals at lower margins in a competitive environment.

As previously communicated, the ambient business within CPG ceased trading at the end of September 2019 and we sold the Cold business to Vector Logistics in November 2019. We retained over 1 800 employees (excluding staff in the Cold business) and approximately 80% (revenue) of contracts from the ambient business. These contracts and staff were accommodated mainly in the Dedicated Contracts and Health Sciences businesses. As the contracts are being transitioned, some of the benefits were achieved in H2 F2020 – with the full benefit only being realised from the 2021 financial year. As the business wound down, CPG incurred a free cash outflow of R595 million in H1 F2020 with no further trading losses incurred from CPG in H2 F2020.

Net capital expenditure from continuing operations (excluding IFRS 16) of R717 million was incurred during the year and mainly comprised expanding the fleet to accommodate new contracts and replacement of transport fleet.

ROIC declined from 12,7% to 9,0% and is below our hurdle rate of WACC + 3% mainly due to lower profits resulting from the negative impacts of Covid-19.

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

  Half year 1 unaudited       Half year 2*      Full year unaudited   
Logistics South Africa  2020  2019 
change 
    2020  2019 
change 
    F2020   F2019^
change 
 
Revenue (Rm)   7 426  6 470  15      6 493  6 385      13 919  12 855   
EBITDA (Rm)   1 030  930  11      570  924  (38)     1 600  1 854  (14)  
Operating profit (Rm)   632  553  14      94  512  (82)     726  1 065  (32)  
Operating margin (%)   8,5  8,5        1,4  8,0        5,2  8,3     
Return on invested capital (%)   13,4  11,9                  9,0  11,3     
Weighted average cost of capital (%)   8,8  10,0                  8,1  9,3     
Net debt including IFRS 16 – Lease liability (Rm)   4 056  4 200  (3)               4 436  3 585  24   
Net debt excluding IFRS 16 – Lease liability (Rm)   2 362  2 251                2 661  1 469  81   
Working capital (Rm)   (286) 535  (153)               (626) (116)    
^ 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.

Note: Continuing operations, excluding businesses held for sale (mainly Pharmed), head office costs and eliminations.