Imperial

Imperial Logistics performed satisfactorily in mixed trading conditions, supported by excellent results from Logistics African Regions, offset by the underperformance in the consumer packaged goods (CPG) and healthcare businesses in Logistics South Africa, and the lower results from the automotive and express palletised distribution businesses in Logistics International.

• Each division remains focused on concluding the rationalisation of their portfolios and improving efficiencies, with an increased drive to significantly remove and reduce costs, which we anticipate will be concluded in H2 F2019 and the benefits of which will be fully realised in the 2020 financial year.
• Imperial Logistics’ renewal rate across its 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 approximately R4,0 billion was secured during the past 12 months, the full benefit of which should be realised in the 2020 financial year as contracts were concluded at various times during the period.
• Excluding businesses held for sale, Imperial Logistics recorded growth in revenue of 6% and operating profit remained stable. Revenue* generated outside South Africa increased 10% to R18,8 billion (70% of group revenue) and operating profit* generated outside South Africa increased 5% to R867 million (65% of group operating profit). A full reconciliation from earnings to headline earnings is provided in the group financial performance section.
• Net working capital of R2,6 billion increased from R1,9 billion in June 2018, impacted mainly by higher inventory in Logistics African Regions and an increase in trade and other receivables in Logistics International. We expect working capital to normalise by June 2019.
• Net debt increased by 9% or R509 million when compared to June 2018 but was significantly lower when compared to the prior period – mainly due to the recapitalisation of Imperial Logistics and the disposal of Schirm in F2018.
• Free cash flow from continuing operations increased to R258 million from an outflow of R594 million as the prior period included significantly higher cash outflow arising from working capital movements.
• 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 ending 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 R4,2 billion in the statement of profit or loss.

Performance

Imperial Logistics South Africa delivered an unsatisfactory performance in challenging market conditions, reducing revenue by 2% and operating profit by 9%. Results were negatively impacted by depressed volumes and lower consumer demand mainly in the CPG and healthcare businesses, partly offset by good results from the transport and warehousing and supply chain management and consulting businesses. The transport and warehousing, and specialised freight segments also experienced lower volumes during the six months but good cost management, rationalisation and consolidation of operations mitigated this. With the exception of the CPG and healthcare businesses where margins were significantly affected by lower revenues, most other businesses were largely able to sustain their operating margins through rationalising and improving efficiencies and reducing costs significantly

Net capital expenditure increased to R435 million from R347 million in the prior period and comprised mainly of expanding the fleet to accommodate new contracts, as well as the replacement of transport fleet.

The net debt to equity ratio improved from 67% in the prior period to 63% mainly as a result of the proceeds of R200 million received from Afropulse through the broad-based black economic empowerment (BBBEE) transaction. The ROIC of 12,2 % reduced from 13,4% in the prior period mainly due to lower profits, and is below the target hurdle rate of WACC +3%.

• More on divisional performance