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.
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.
Pro forma Logistics International Regions segment results
| Half year 1 unaudited | Half year 2* | Full year unaudited | ||||||||||||||
| Logistics International | 2020 | 2019 | % change |
2020 | 2019 | % change |
F2020 | F2019^ | % change |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue (€m) | 551 | 565 | (2) | 534 | 601 | (11) | 1 085 | 1 166 | (7) | |||||||
| EBITDA (€m) | 62 | 56 | 11 | 33 | 56 | (41) | 95 | 112 | (15) | |||||||
| Operating profit (€m) | 23 | 20 | 15 | (15) | 16 | (194) | 8 | 36 | (78) | |||||||
| Operating margin (%) | 4,2 | 3,5 | (2,8) | 2,7 | 0,7 | 3,1 | ||||||||||
| Return on invested capital (%) | 4,1 | 6,8 | 1,0 | 3,7 | ||||||||||||
| Weighted average cost of capital (%) | 5,6 | 6,5 | 5,3 | 6,0 | ||||||||||||
| Net debt including IFRS 16 – Lease liability (€m) | 428 | 426 | 419 | 437 | (4) | |||||||||||
| Net debt excluding IFRS 16 – Lease liability (€m) | 234 | 193 | 21 | 229 | 225 | |||||||||||
| Working capital (€m) | 44 | 28 | 57 | (23) | 33 | (170) | ||||||||||
| Revenue (Rm) | 8 982 | 9 229 | (3) | 9 633 | 9 630 | 18 615 | 18 859 | (1) | ||||||||
| EBITDA (Rm) | 1 004 | 917 | 9 | 583 | 894 | (35) | 1 587 | 1 811 | (12) | |||||||
| Operating profit (Rm) | 372 | 315 | 18 | (316) | 273 | (216) | 56 | 588 | (90) | |||||||
| Operating margin (%) | 4,1 | 3,4 | (3,3) | 2,8 | 0,3 | 3,1 | ||||||||||
| Return on invested capital (%) | 4,1 | 6,0 | 0,5 | 3,7 | ||||||||||||
| Weighted average cost of capital (%) | 5,6 | 5,8 | 5,3 | 6,0 | ||||||||||||
| Net debt including IFRS 16 – Lease liability (Rm) | 6 722 | 7 016 | (4) | 8 176 | 7 084 | 15 | ||||||||||
| Net debt excluding IFRS 16 – Lease liability (Rm) | 3 679 | 3 296 | 12 | 4 459 | 3 634 | 23 | ||||||||||
| Working capital (Rm) | 687 | 456 | 51 | (438) | 506 | (187) | ||||||||||
| ^ | 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.
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 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.
| Full year | ||||||
| Logistics International | 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 | ||||
| ^ | Prior year numbers have been restated for the impact of IFRS 16 – Leases where applicable. |
Note: Continuing operations.
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 the 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. More details are included in the disposals section of this report.
Contract logistics decreased revenue by 14% but increased operating profit by 20% (in Euros). Automotive contract logistics businesses most impacted as all 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 dependant 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.