Preliminary summarised results
for the year ended 30 June 2020

Results overview

  1. Despite challenging trading conditions, exacerbated by the Covid-19 pandemic, Imperial increased revenue from continuing operations, generated strong free cash flow, maintained a strong balance sheet, effectively managed costs and recorded significant progress against its strategy.
  2. H2 F2020’s trading performance was severely impacted by the decline in volumes across all regions in which we operate due to various levels of Covid-19 restrictions implemented, partially offset by new contract gains and acquisitions.
  3. While revenue in H2 F2020 grew by 7% mainly due to the benefit of new contract gains and acquisitions, continuing operating profit was down 100% (R1,1 billion) largely due to the impact of Covid-19 on revenue, associated once-off costs and impairments, further restructuring mainly in South Africa to reduce costs, and translating 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 9 months of F2020.
  4. While operating profit from continuing operations for the year was down 40% to R1,5 billion, earnings before interest, taxation, depreciation and amortisation (EBITDA) from continuing operations was only down 11% to R4,1 billion. Operating profit was impacted by a 20% increase in depreciation and impairments largely due to currency movements and once-off items associated with Covid-19. Depreciation and amortisation of leases are straight-lined and could not be reduced in line with revenue declines that were impacted by Covid-19.
  5. We successfully concluded the sale of our European shipping business at a profit after tax (PAT) multiple of c.15 times. The group’s net debt:EBITDA at 30 June 2020, adjusted for the R3 440 million proceeds received from this disposal on 31 July 2020, is 1,6 times – well within the group’s banking covenants of 3,25 times.
  6. Strategic acquisitions to the value of c.R900 million were concluded mainly in the second half, which contributed positively.
  7. Continuing operating margin declined from 5,5% in the prior year to 3,1%. This is mainly due to the negative impact of Covid-19.
  8. Imperial’s contract renewal rate across its operations on existing contracts remains strong at c.80%, with an encouraging pipeline of new opportunities.
  9. New business revenue of approximately R6,2 billion per annum was secured to the end of June 2020, up 11% compared to the prior 12 months.
  10. Net working capital of R544 million, excluding disposal groups, improved significantly by 61% compared to R1,389 million at June 2019, and is in line with our guidance of 4% to 5% of revenue.
  11. Net capital expenditure of R1 149 million from continuing operations increased from R795 million in F2019 mainly due to expansion capital expenditure on new contract gains. Net capital expenditure was significantly lower than depreciation. Due to the implementation of IFRS 16, the depreciation figure includes the depreciation of the right-of-use assets, whereas it is not included in capital expenditure. Excluding the depreciation of the right-of-use assets, capital expenditure exceeded depreciation resulting from investment in support of new contract gains.
  12. Net debt (excluding lease obligations and before the receipt of the European shipping disposal proceeds) of R8,4 billion increased by 47% compared to June 2019 mainly due to investment in acquisitions, foreign exchange translations at the end of the year when converting foreign debt to Rands, and the reclassification of cash resources relating to the entities that have been classified as disposal groups. A summary of the movements is provided in the group financial performance section.
  13. Free cash flow (post-maintenance capex and including discontinued operations) generated of R1 043 million was lower than the prior year (F2019: R1 437 million excluding Motus) due to the impact of Covid-19 on operations and consumer packaged goods (CPG), which incurred a cash outflow of R609 million for the year (in line with expectation and previous guidance) as it was in the closure process. Free cash flow (post-maintenance capex and excluding discontinued operations) decreased to an inflow of R1 304 million from a cash inflow of R1 944 million for the 12 months ended 30 June 2019.
  14. Our cash and liquidity position remains strong with R13,2 billion of available facilities and cash, of which c.R10,7 billion are committed banking facilities.
  15. ROIC of 4,9% (F2019: 7,6%) versus WACC of 7,6% (F2019: 8,5%).
  16. Discontinued operations: the CPG business in South Africa was classified as a discontinued operation towards the end of the June 2019 financial year and while this business was exited in November 2019, it was wound down during the first half of F2020. The European shipping business was sold on 31 July 2020 and is also classified as a discontinued operation in these results. The South American shipping operation remains part of continuing operations but is available for sale.
  17. IFRS 16 – Leases standard was adopted with effect from 1 July 2019 using the full retrospective approach; comparatives have therefore been restated to include this impact. The impact of IFRS 16 to equity at 1 July  2018 is a reduction of R417 million. On this date right-of-use assets amounting to R5 335 million and lease obligations amounting to R5 850 million were recognised, as well as the deferred taxation related to these balances.
  18. IFRIC 23 – Uncertainty over Income Tax Treatments was also adopted retrospectively with effect from 1 July 2019, and comparatives have therefore been restated to include this impact. The impact of IFRIC 23 to equity at 1 July  2018 is a reduction of R6  million and a corresponding increase to current tax liabilities of the same amount.
  19. A fundamental shift in our strategic transformation journey is organising and positioning Imperial, based on the solutions we offer to our clients (our capabilities) and less so on regions. As such, effective 1 July 2020 Imperial operates within two overarching solutions – market access and logistics and is categorised into three businesses: Market Access, Logistics Africa and Logistics International. The logistics businesses encompass contract logistics and freight (road, air/ocean and lead logistics provider (LLP)). For purposes of IFRS reporting, primary segmentation for F2020 remains as regional disclosure. The narrative of this report is, however, aligned to the new organisational structure.

Impact and response to Covid-19

Imperial plays a critical role in the supply of essential services and products in the many countries in which it operates and we continue to keep the wheels turning so that people can receive medication, food and other essentials. Our focus during the crisis is first and foremost to protect our people and operations from infection. Stringent safety and strict access control procedures remain in place and rigorous hygiene, cleaning and disinfecting procedures have also been implemented – with dedicated resources in place to support and monitor Covid-19-related risks at each operation. Staff training has been customised to heighten awareness of risks and preventative measures. While many staff continue to work from home, different shift systems have been introduced to increase social distancing and a two-team model implemented to ensure continuity when a member of the team tests positive for the virus. Up to the end of July 2020, 385 staff across Imperial’s operations tested positive for the virus, with the majority making a full recovery. Sadly, 11 of our colleagues succumbed to the virus and we extend our deepest condolences to their families.

As reflected in these results, most of our businesses have seen significant impacts on volumes due to lockdown restrictions. The month of April was the worst affected with South Africa trading at c.55% of volumes, African Regions c.70% and Europe c.50%. Many of our markets have now eased lockdown restrictions and significant recovery has been recorded during July and August across our operations, although volumes remain at pre-Covid-19 levels.

Throughout the Covid-19 pandemic we have worked hard and remain focused on maintaining a sound financial position, generating cash, tightly managing costs and executing on our strategic imperatives to make us resilient for the future. The benefits of these have been reflected in these results.

We also continue to support all our key stakeholders and countries of operation, strongly demonstrating our purpose as a business – which is connecting Africa and the world and improving people’s lives with access to quality products and services. Some of these initiatives include:

  • Providing support to staff and prioritising their safety, including paying salaries of c.R160 million to operational staff whose services were not required at the operations during periods of lockdown between March and June.
  • Continuing to achieve high-service levels with key customers and clients – and in certain cases we have put additional capacity in place to assist our clients in meeting increased demand.
  • Continuing to service our market access channels where possible.
  • Reduction of fees by 25% by Imperial’s non-executive directors from April until end June 2020.
  • A 25% cut in salaries by Imperial’s Group executive committee from April until end June 2020.
  • Contribution of R5 million to the Solidarity Fund in South Africa.
  • Contribution of R5 million to the Giving for Hope Foundation in support of small, medium and micro-enterprises (SMMEs).
  • Contribution of R500 000 to the Gift of the Givers humanitarian organisation, in addition to the humanitarian assistance and operational support provided by the business to various charitable organisations.
  • Responding to the particular need for personal protective equipment (PPE) and sanitiser, Imperial sourced and delivered thousands of cubic meters of PPE and medical-grade hand sanitisers to public and private sectors in South Africa and Europe.
  • Partnering with charity organisations, providing vehicles and resources to deliver food parcels and other basic needs to communities most impacted by the crisis.
  • Over 75 000 patients were screened for Covid-19 through Unjani clinics (CSI project supported by Imperial).

The pandemic has provided lessons for us that will fundamentally change the way we live and work in the future. Imperial will continue to learn and adapt – carefully observing the shift in trends and market conditions and adjusting strategy and operations to leverage opportunities. Some of these trends and opportunities include:

  • Shortening supply chains and support for local manufacturing – significant logistics and market access opportunity.
  • As clients rethink their supply chains, there will be greater demand for visibility and resilience – providing data and technology solutions will be a key differentiator.
  • Clients will look to outsource more and focus on core capabilities which will present a strong pipeline of new opportunities.
  • Further changes in industry structures, consumer behaviour, marketing positioning must be anticipated and accommodated. The logistics industry is resilient and will become more relevant and stronger as these changes take place.
  • Consumer behaviour will change and the rise of the contact free economy will continue. Ecommerce, online consumer engagement, tele-medicine etc will shape business models, which provides an excellent opportunity in Africa as current service levels have significant room for improvement.
  • Remote and flexible working conditions will increase. This will present opportunities for efficiencies and cost-savings.
  • Increased demand for products and investment in capacity in the healthcare industry. Imperial is ideally positioned based on our end-to-end value chain – with sourcing, procurement, distribution, market access, mobile clinics etc – and c.21% of our revenue is generated from the healthcare industry.
  • With greater government and regulatory intervention and scrutiny, there is increasing pressure on businesses to holistically and visibly embrace the principles of environmental, social and corporate governance (ESG).
  • Organisations will need to give equal priority to employees, communities and financial performance.