Unaudited interim results

Imperial delivered a good performance – growing revenue and operating profit from continuing operations by 1% and 9% respectively. Results benefited from new contract gains and the benefits of the rationalisation and cost cutting in South Africa and International in F2019, despite increasingly challenging trading conditions in most of its markets that negatively impacted volumes across most businesses. Our balance sheet management remained sound, with significant capacity to achieve our organic and acquisitive growth strategies.

• Continuing revenue generated outside South Africa was R17,8 billion and accounted for 70% of group revenue compared to R18,7 billion in the prior period (H1 F2019: 74% of group revenue).
• Continuing operating profit generated outside South Africa was R1,1 billion and accounted for 64% of group operating profit, up 10% compared to R1,0 billion generated in the prior period (H1 F2019: 64% of group operating profit).
• Continuing operating margin improved from 5,9% in the prior period to 6,4%.
• Imperial's contract renewal rate across our divisions on existing contracts is c.80%, with an encouraging pipeline of new opportunities, supported by a good new contract gain rate in all three divisions despite macro-economic challenges.
• New business revenue of approximately R5,8 billion p.a. was secured to the end of December 2019.
• Net working capital of R2 088 million improved by 16% compared to R2 492 million at December 2018 but increased by 54% compared to the working capital at 30 June 2019 largely due to seasonal factors as previously experienced and new contract gains. Net working capital was in line with our guidance of 4% to 5% of revenue.
• Net capital expenditure of R815 million increased from R700 million in H1 F2019 but was significantly lower than depreciation. Due to the implementation of IFRS 16 depreciation includes the depreciation of the right-of-use assets, whereas capital expenditure does not include this. Excluding the depreciation of the right-of-use assets, capital expenditure exceeded depreciation due to investment in support of new contract gains.
• Net debt (excluding lease obligations) of R7,4 billion increased by 29% compared to June 2019, mainly impacted by working capital movements, increased capital expenditure and once-off effects of CPG. A summary of the movements in debt is provided in the group financial performance section.
• Free cash flow including CPG decreased to an outflow of R565 million from a cash inflow of R255 million for the six months ending 31 December 2018. This outflow is largely driven by CPG which incurred a cash outflow of R595 million as it is in the closure process. Free cash flow excluding CPG decreased to an inflow of R30 million from a cash inflow of R58 million for the six months ending 31 December 2018.
• Discontinued operations: The unbundling of Motus was concluded in November 2018 and Motus is thus presented as a discontinued operation in the comparative results. 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 is still currently being wound down. No further trading losses will be incurred from CPG in H2 F2020. Total basic HEPS was therefore down 77% to 190 cents per share and total basic EPS down 93% to 223 cents per share, which included contributions from CPG in the current period and contributions from both CPG and Motus in the prior period.
• IFRS 16 – Leases standard was adopted with effect from 1 July 2019 using the full retrospective approach; comparatives have therefore been restated. The impact of IFRS 16 to equity at 1 July 2018 is a reduction of R403 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 the recognition of these balances.

Note: Comparatives have been restated for IFRS 16 – Leases and December 2018 was also represented for the CPG discontinued operation.

Imperial's activities for continuing operations on the African continent produced 55% and 67% of revenue and operating profit respectively during the six months to December 2019, with the remainder generated mainly in the Eurozone and United Kingdom (UK).

Across regions, our businesses were exposed to heightened difficult economic and trading conditions across all markets, with minimal recovery expected in the short term. The benefits of significant rationalisation and cost cutting in the previous financial year and new contract gains assisted our businesses in mitigating the impact of this challenging trading environment.

South Africa

R7,6 billion or 30% of group revenue and R579 million or 36% of group operating profit was generated by this division in the six months to 31 December 2019. Persistently weak economic conditions, high unemployment and the resultant low-consumer spending continued to negatively impact volumes – with this trend likely to continue into the foreseeable future. The impact of load shedding further added to the pressure on our businesses. This division was also exposed to an increasingly competitive environment, where we continue to face margin pressures on contract renewals.

Despite this challenging context, the South Africa division performed well during the period. Supported by new business – and increasing revenue and operating profit – the division demonstrated its resilience in challenging trading conditions. The division has a healthy new business pipeline on the back of outsourcing opportunities in a largely fragmented market where existing and new clients want to focus on their core business and eliminate costs from their supply chain.

Rest of Africa

Our primary positioning as a leading distributor in the healthcare and consumer space continues to stand us in good stead in the rest of Africa where R6,4 billion or 25% of group revenue and R511 million or 31% of group operating profit was generated for the six months – despite mixed trading conditions on the continent, subdued growth and lower-consumer spending in certain countries of operation.

In the healthcare segment, the businesses in West Africa delivered an excellent performance, as did Imres with a record order book.

Factors negatively impacting performance included the ongoing economic recessionary conditions in Namibia resulting in reduced volumes in our consumer business; increasingly poor economic conditions in Zimbabwe which resulted in significantly lower cross-border volumes; and a slow economic recovery and an increasingly competitive market in Kenya.

Notwithstanding these mixed trading conditions across the continent, African Regions maintained revenue and increased operating profit for the six months to 31 December 2019.

We remain positive on the rising consumerism, urbanisation and increasing demand for quality healthcare and consumer goods on the continent, where we are well placed to benefit from our market access services offering to healthcare and consumer principals.

Eurozone and UK

Our international operations generated R11,4 billion or 45% of group revenue and R545 million or 33% of group operating profit in the six months to 31 December 2019. In Europe, certain sectors in which we operate – such as steel, chemicals and automotive – remain under pressure. While Germany – our largest market – avoided entering a recession, trading conditions are increasingly deteriorating, resulting in a decline in volumes across our key industries, offset by new contract gains and cost-cutting initiatives.

In the UK, Brexit continues to increase economic and political uncertainty, with the potential risk of depressing consumer demand and activity – an ongoing risk to the volumes of our express palletised distribution business (Palletways).

Tough trading across all industry verticals saw a decline in volumes in most of our markets of operation. The impact of this was somewhat mitigated by new contract gains and robust contract renewal rates.

Healthcare

This segment achieved double-digit revenue growth versus the prior period, maintaining or growing market share and securing new business. Our businesses in both East and West Africa grew revenue despite continuing challenging economic conditions, increasingly competitive markets and ongoing margin pressures.

We thus remain optimistic about the healthcare environment in Africa. The trends of rising consumerism, government health expenditure, urbanisation, favourable population demographics and strengthening of healthcare systems are all positive in terms of greater demand for quality healthcare. The continuing focus above country and at government level on developing universal health coverage – and the increasing access to medicines that will bring – will be an important driver of growth. In several countries (including Kenya and Nigeria), consolidation of healthcare channels can bring efficiencies as we strive to connect more and more patients to quality healthcare products.

The dynamics of the regulatory environment – which includes global serialisation regulations, variability in requirements between countries and pro-national regulations – and the emerging issue of substandard health products, are just a few examples of where we will pursue additional growth opportunities. We will likewise look to fully leverage synergies between our consumer and healthcare businesses and invest in new capabilities, technology and geographies – leveraging the significant footprint we already have in Anglophone sub-Saharan Africa and our unique capabilities in this sector to provide a pan-African solution for pharma companies looking to access the fast-growing healthcare markets in rest of Africa.

Our medical supplies and kitting business, Imres, has increased its kitting capacity to meet additional global demands – positioning it well in entering into new contracts with large global donor aid organisations.

Consumer

Despite difficult trading conditions and decreased volumes in this sector in South Africa, significant new business was secured in the period under review. As previously communicated, Imperial exited the multiprincipal distribution model in CPG in South Africa and redirected its focus on the dedicated contracts component of the consumer business – accordingly retaining c.80% of the contracts (revenue) with ambient clients. Sluggish retail sales – resulting in store consolidation, range rationalisation and volume declines – have resulted in increased focus on new business opportunities, alongside the ongoing importance of contract renewal.

Within the African Region's context, many suppliers continue to focus on depth of distribution as a way to extract value for their business and increase both volumes and profitability. The largely untapped informal retail market is particularly attractive, in which we offer market access scale, reach, expertise and track record. With data critical to both streamlining distribution and reducing costs, this is also increasingly an area of which our ability and expertise are significantly strengthened.

E-commerce remains pivotal to the future growth of this sector and we are accordingly developing competencies and solutions in this segment.

Automotive

Notwithstanding declining volumes, our diverse expertise and longstanding experience in this vertical was evidenced in the new business won in the period under review. With successful implementations undertaken for both longstanding and new clients, we are currently working alongside both to determine future opportunities within new regions of operation.

Electrification remains the key disruptor in this sector – alongside the ongoing, severe cost-cutting measures being undertaken by original equipment manufacturers (OEMs) and related partners. Our diverse portfolio and notable track record ensure we remain well positioned to both leverage and withstand these trends. Opportunities in the European and Chinese car battery, aftermarket parts and tyre sectors, for example, are being explored to mitigate ongoing volume declines and will serve to deliver future growth amid the cost cutting and investment shifts evident in this industry.

Chemicals and energy

Our combination of scale, reach, expertise and technology served as a buffer against volume declines and we realised new business gains in this sector. With much of our revenue generated under long-term contracts, our performance remains resilient in an industry characterised by diverse economic cycles.

Our well-established leadership position in this industry – in Germany and the Netherlands, in particular – sees us well placed to leverage the opportunities associated with the global transition to renewable energy sources. Lithium battery logistics, for example, are highly complex in terms of storage, transport, pre-loading and recycling. Here our dangerous goods expertise is invaluable in developing end-to-end supply chain solutions that mitigate risk and optimise our clients' lithium battery value chain.

Our rapid pace of innovation likewise differentiates us in this sector and we continue to work alongside clients to future proof their supply chains – solving complex problems with sophisticated, customised solutions underpinned by our digitalisation and data science expertise.

Imperial is a significant player in the bulk and packed fuel and gas sector in South Africa and is also a primary supplier of fuels into various countries in sub-Saharan Africa – ensuring that the highest standards in terms of health, safety, security and environmental practices in our chemical logistics activities are maintained at all times.

Industrial and mining

Despite a decline in volumes, new business opportunities were won in the period under review. With industrial supply chains typically multifaceted – encompassing vendors, labour, manufacturers, assets, technologies, data and other resources – our proven ability to provide clients with integrated, end-to-end solutions continues to provide a competitive advantage. With both national and multinational companies accordingly preferring to partner with large, multimodal service providers to manage these multiple aspects of their supply chain, we will continue to drive cross selling and increase our share of wallet within our existing client base – further investing in strategic account management teams and senior-level sales talent in both 4PL services and contract logistics.

The rapid pace of automation and technological innovation in this vertical provides us with ongoing opportunities to guide clients in applying cutting-edge thinking in order to develop resilient and thriving supply chain and commercial practices. Robotics, machine learning and systems engineering are all areas within which we are investing and actively acquiring practical knowledge for client benefit. Initiatives and active research on solutions involving advanced automation and intelligent machines will continue – including the potential of robots and cobots (collaborative robots); automated sortation systems; automated guided vehicles; and goods-to-person systems.

In mining, our solutions are focused predominately in Southern Africa, where Imperial provides transportation solutions for bulk commodities like iron ore into manufacturing facilities and the delivery of chrome, magnetite and magnesium into export ports and terminals. Imperial Advance, our strategic broad-based black economic empowerment (BBBEE) entity specialising in the mining, chemical and energy sectors has established a strong sales pipeline during the past six months.

Note: Continuing operations

* Prior year numbers have been restated for the impact of IFRS 16 – Leases where applicable and represented for CPG discontinued operations.

Notwithstanding the difficult, low-growth and increasingly competitive trading environment, the South Africa division – increased both revenue and operating profit by 13% and 8% respectively. These results were supported by new contract gains of c.R2,1 billion annualised revenue; retention of Consumer Packaged Goods (CPG) contracts that are now operating under more viable commercial terms; and the benefit of cost-saving initiatives undertaken in F2019. Lower volumes and margins in the healthcare business and contract renewals at lower margins due to the competitive environment impacted performance negatively.

As a leading player across the logistics value chain in the industries in which we operate, freight management recorded revenue and operating profit growth of 4% and 19% respectively, supported by the benefits of cost-cutting initiatives. Revenue and operating profit growth of 35% and 7% respectively were recorded in contract logistics resulting mainly from new business gains.

Revenue and operating profit generated by market access activities in healthcare declined due to the underperformance of Pharmed. We have taken numerous corrective actions to ensure that Pharmed can remain viable for operation. These include reducing our cost to serve, heightened attention to driving sales, and increasing service delivery levels. We will continue to monitor the progress and viability of this business.

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 have been accommodated mainly in the Dedicated Contracts and Health Sciences businesses. As the contracts are being transitioned – the full benefit will only be realised from the 2021 financial year. The CPG closure costs previously communicated (an impairment of assets including goodwill of c.R590 million and provisions for closure costs of c.R850 million post-tax) remain unchanged. CPG incurred a cash outflow of R595 million as the closure process is being concluded. No further trading losses will be incurred from CPG in H2 2020.

Net capital expenditure, excluding IFRS 16, increased from R404 million in the prior period to R463 million mainly due to expansion of the fleet to accommodate new contracts.

ROIC improved to 11,8% from 11,2% of the prior period and is in line with the target hurdle rate of WACC +3%.

Note: Continuing operations

* Prior year numbers have been restated for the impact of IFRS 16 – Leases where applicable.

African Regions delivered a good performance – maintaining revenue and increasing operating profit by 7% – despite mixed trading conditions across the region.

This division is a leading player in market access – mainly in healthcare and consumer in Southern, East and West Africa – which accounts for 86% of its revenue and 99% of its operating profit.

The market access business in healthcare in West Africa recorded excellent growth. Results were also supported by an excellent performance from Imres which contributed to the increase in the division's margin to 8,0% from 7,6% in the prior period. The consumer business in Mozambique continues to secure new business and also contributed positively. Overall, African Regions secured new contract gains of c.R1,5 billion annualised revenue during the period.

African Regions' revenue and operating profit for the period was negatively impacted by the absence of Resolve Africa's once-off project work which was included in the prior period. The division's results were also partially offset by under performance from the market access healthcare business in Kenya – impacted by a slow economic recovery and an increasingly competitive market. The market access consumer business in Namibia was negatively impacted by tough trading conditions. The cross-border freight management business underperformed mainly due to increasingly poor economic conditions in Zimbabwe resulting in significantly lower cross-border volumes.

Revenue and operating profit in contract logistics declined compared to the prior period, impacted negatively by substantially lower volumes from global aid organisations on the back of the loss of the donor aid contract as previously reported.

Net capital expenditure, excluding IFRS 16, of R55 million was incurred during period (H1 F2019: R26 million).

ROIC at 15,9% remains healthy and is in line with the target hurdle rate of WACC +3%.

Note: Continuing operations

* Prior year numbers have been restated for the impact of IFRS 16 – Leases where applicable.

In increasingly challenging trading conditions in Europe this division decreased revenue by 8% but increased operating profit by 13% in Euro terms. The decline in revenue was mainly as a result of the impact of low-water level surcharges which resulted in increased billings and subcontractor costs in the prior period. Excluding this impact, revenue grew by 3% in Euro terms.

Results for the six months were supported by the benefits of the significant cost-cutting initiatives in the prior period, contract renewals and new business gains of c.R2,2 billion annualised revenue.

Revenue generated by freight management declined by 11% mainly due to low water level surcharges in shipping. However, operating profit increased mainly due to improved profitability from the express palletised business as corrective measures taken to eliminate costs, changing our pricing model to address the increased costs caused by the network imbalance and appointing additional members, reaped benefits. The shipping business in Europe and South America also contributed positively to operating profit growth.

Contract logistics maintained revenue, impacted negatively by lower volumes in the chemicals business. Contract logistics increased operating profit due to the automotive business benefiting from new contract gains, improved pricing and cost reduction benefits.

The ROIC of 7,4% declined from 8,9% mainly due to a weak H2 F2019 performance resulting from once-off costs but remains in line with the target hurdle rate of WACC +2%.

Net capital expenditure, excluding IFRS 16, of R278 million increased marginally from R240 million in H1 F2019 and included the replacement of specialised chemical and gas fleet.

GROUP PROFIT OR LOSS (EXTRACTS)

~ Restated for IFRS 16 – Leases and represented for CPG discontinued operations.

Operating profit from continuing operations increased by 9%, positively impacted by strong double-digit growth in revenue in South Africa which translated into positive growth in operating profit; strong growth in the healthcare business in African Regions mainly in West Africa and Imres; and improved margins in the International division.

The R139 million increase in profit before tax to R1 151 million (before exceptional items) is mainly attributed to:

• the increase in operating profit;
• a decrease in the amortisation of intangibles arising on business combinations as certain intangible assets were fully amortised in the prior period;
• foreign exchange gains compared to a loss in the prior period; and
• partially offset by an increase in net finance costs mainly due to the once-off gain that arose on the redemption of the preference shares of R63 million in the prior period, that resulted in a reduction to finance cost.

Exceptional items comprised mainly of minor goodwill impairments.

Significant contributors to the higher effective tax rate were deferred tax assets that were not recognised for some loss-making entities and non-deductible expenses.

The loss from discontinued operations comprises CPG in the current period and both Motus and CPG in the prior financial year.

The increase in non-controlling interests resulted mainly from the increase in the share of profits by non-controlling interest in the Nigerian healthcare business, Eco Health, and Imres in African Regions; Imperial Advance and Itumele Bus Services in South Africa; and Palletways in the International division – offset partially by an increase in the non-controlling share of losses in Pharmed in South Africa.

EARNINGS AND HEADLINE EARNINGS PER SHARE

FINANCIAL POSITION

~ Restated for IFRS 16 – Leases and represented for CPG discontinued operations.

The significant variances on the financial position at 31 December 2019 when compared to 30 June 2019 are explained as follows:

• Investments and other financial assets decreased mainly due to the delivery of Motus shares to participants of the deferred bonus plan (DBP) scheme that settled in September 2019.
• The increase in other liabilities is mainly due to an increase in contingent consideration relating to the purchase of Axis Group International in African Regions – partially offset by a decrease in the put option liability as a result of minority buyouts in Eco Health.
• The increase in net working capital is mainly as a result of increased sales in the African Regions' healthcare business and new contract gains in South Africa. Net working capital has, however, declined when compared to the working capital at 31 December 2018 of R2 492 million. The decline from December 2018 is explained by the provisions raised in CPG. Net working capital was in line with our guidance of 4% to 5% of revenue.
• The movement in net debt excluding lease liabilities is explained in the cash flow summary that follows.
• The decrease in the lease liability is mainly due to lease payments amounting to R1 138 million during the period offset partially by new leases that were capitalised during the period.

Movement in total equity for the six months to 31 December 2019

Total equity of R8 237 million decreased by R410 million from R8 647 million previously reported on 30 June 2019.

The following details the changes in equity during the year:

CASH FLOW SUMMARY TO DECEMBER 2019 INCLUDING CPG IN BOTH PERIODS EXCLUDING MOTUS IN THE COMPARATIVE PERIOD

The following are the significant cash flow items:

Cash generated by operations before movements in net working capital of R2 682 million decreased by R304 million mainly due to cash utilised by operations in CPG increasing compared to December 2018. This will not recur going forward.

An increase in net working capital from 30 June 2019 resulted in a cash outflow of R1 094 million. The increase is mainly attributed to higher trade receivables and inventory levels in the African Regions' healthcare business and new contract gains. Net working capital was in line with our guidance of 4% to 5% of revenue.

Net capital expenditure increased to R815 million from R700 million in H1 F2019 primarily due to higher investment in fleet expansion as a result of the purchase of the Lowveld Buses contract in South Africa, new contract gains and specialised new fleet acquired in International.

Interest of R422 million and tax of R261 million were paid during the six months.

Dividends amounted to R282 million during the period.

Other significant cash outflow items included lease liability payments of R1 138 million, share buybacks of R225 million (at an average share price of R52 per share – six month VWAP), and changes to non-controlling interests of R80 million.

The cash flow benefited from an inflow arising from movements in other associates and joint ventures mainly due to the sale of associates in the South African division during the period.

Free cash flow including CPG decreased to an outflow R565 million from a cash inflow of R255 million for the six months ending 31 December 2018. This outflow is largely driven by CPG which generated a cash outflow of R595 million as it is currently in a closure process. This will not recur going forward. Free cash flow excluding CPG decreased to an inflow of R30 million from a cash inflow of R58 million for the six months ending 31 December 2018.

Liquidity

The group's liquidity position remains strong with R10,6 billion of unutilised banking facilities. 73% of the group debt is long term in nature and 49% of the debt is at fixed rates.

Dividend

An interim cash dividend of 167 cents per ordinary share (before withholding tax) has been declared. The dividend is in line with our targeted pay-out ratio of 45% of continuing HEPS, subject to prevailing circumstances.

Geka Pharma (Namibia)

The acquisition of a 65% shareholding in Geka Pharma, a distributor of pharmaceutical, medical, surgical and allied products in Namibia for R80 million, which includes a contingent consideration of R31 million, was concluded. Geka Pharma has been supplying pharmaceuticals to the healthcare industry in Namibia for more than 45 years. As previously communicated, this transaction is in line with Imperial's strategy to expand into healthcare to complement its consumer footprint in Namibia. The acquisition, effective 1 January 2020, will create a footprint for Imperial in the healthcare industry in Namibia.

MDS Logistics (Nigeria)

Imperial's acquisition of a further 8% shareholding in MDS Logistics, Nigeria's leading provider of integrated supply chain solutions, was concluded in January 2020. This transaction included Imperial transferring some existing profitable contracts to MDS Logistics, and paying a further USD2.4 million in cash. This takes our shareholding in the business from 49% to 57%. MDS Logistics provides a unique bouquet of logistics solutions through 48 distribution centres and 53 offsite inventory management centres covering over 30 states and a catchment area of over 400 cities and villages. Securing majority control in MDS Logistics will drive integration with Imperial's operations in Nigeria – facilitating the implementation of our value-added logistics offering through an end-to-end solution including transport, warehousing, distribution and market access, and as such leveraging our capabilities in this market.

Consumer business in West Africa

Effective 1 January 2020, Imperial acquired a 51% shareholding in ACP holdings (based in Mauritius) for approximately USD20.3 million, which includes a contingent consideration of approximately USD9.5 million. The trading operations are based in Ghana and are well established as importers and distributors of fast-moving consumer goods. With eight branches across Ghana, the business represents over 30 global brands in various consumer food, beverages and personal care categories. This acquisition is in line with Imperial's strategy to accelerate its growth in Africa, with a strategic focus on the consumer goods and healthcare sectors. Imperial will leverage synergies in the business' expansive Ghanaian network and market access solutions to enhance its capabilities, primarily in healthcare and consumer, in the region. The business currently has direct coverage of over 22 000 retail and wholesale outlets in Ghana and forms an integral part of Imperial's strategy to increase its presence in the burgeoning West African consumer markets.

Axis Group International

Effective the end of December 2019, Imperial acquired a 60% shareholding in Axis Group International which specialises in sourcing and procurement in Asian markets, for a total purchase consideration of USD12 million, which includes a contingent consideration of USD7.3 million. This is a strategically aligned transaction as it will facilitate trade between Imperial's present client base and companies based in China and other Asian markets through the group sourcing and purchasing of products in these markets – and providing market access to companies wanting to trade in these particular regions.

Imperial Sasfin Logistics minority buyout

Imperial recently acquired the remaining minority shares within the entity previously known as Imperial Sasfin Logistics. The change in ownership through this transaction was required to facilitate one of Imperial's strategic objectives to be an international logistics provider managing clients' international freight requirements on a door-to-door basis. The business will be renamed Imperial Clearing and Forwarding.

Strategic positioning

The core strategic focus of Imperial 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.

In order to leverage expertise across the business and be a more client driven organisation – and to better position ourselves for the future, given everchanging macro- and industry trends – we are focusing our service offering and positioning our capabilities in these core industry verticals and less so on regions. With a strategy centred on Africa and the growth aspirations of our clients, we are working to achieve a unified group uniquely capable of delivering sustainable growth and targeted returns. Allowing us to more effectively deliver integrated solutions across our networks and regions, this "One Imperial" approach will deepen our competitiveness and relevance – and retain our market and industry legitimacy.

This growth-led strategic focus is supported by the following short term, core strategic initiatives:

• Growing in Africa by building on existing and expanding into new capabilities; investing in existing and new geographies that complement our capabilities, industries and client base; and evolving client engagement by investing in technology enablement, industry and capability expertise.
• Strategically aligning our international portfolio with our core competitive advantage, being Africa where we are investing in new areas that support our African growth strategy. Through this process we will explore growth opportunities in other emerging and selected developed markets based on the relevance of our capabilities, scale, benefits and client relationships that support trade flows into and out of Africa.

Progress against strategy

Growing in Africa

The African Regions division continued to leverage targeted acquisitions and strategic partnerships with clients and principals. As reported above, four new acquisitions were concluded in the period under review. We also strengthened our healthcare offering with our simplified solutions in healthcare (SSiH) model – which provides a highly efficient way for principals to maintain access to their products across multiple sub-scale markets. We expect to expand this initiative to other principals during the next six months. Furthermore, in support of our clients' growth aspirations, demand generation, light contract manufacturing and brand partnership are among the capabilities we are expanding into the rest of Africa. Leveraging our extensive expertise in healthcare, we have also added sourcing and procurement to other industries.

In South Africa we are expanding our market access capability, focused primarily on healthcare and consumer.

We will be leveraging best-in-class processes, practices and technology across the market access businesses to ensure that we deliver world-class integrated end-to-end solutions to our clients and principals.

Strategically aligning our international portfolio

As previously communicated, we are aligning our international portfolio with our strategic direction and core competitive advantages. We are progressing the disposal of our international shipping business. The market will be kept informed of material developments in this regard. We expect to conclude this process by June 2020 subject to regulatory approvals.

Furthermore, the expansion of specific capabilities through strategic acquisitions and portfolio enhancement – including the potential expansion into freight management (air/ocean) – is being assessed, and the market will be informed as and when any material opportunities have been identified.

People and innovation

Our people and innovation remain critical enablers to our strategy. In order to position Imperial in the pragmatic application of disruptive innovation and new technologies, we established a USD20 million innovation fund in partnership with Newtown Partners. The fund provides a mechanism for effective responses to current and future developments in our industry and invests in high-potential start-ups in relevant supply chain and logistics technology areas. Besides its strategic mandate, the fund will also aim to generate attractive financial returns over its lifetime.

In South Africa, significant progress continues to be made in accelerating transformation (race and gender) with a number of key Black and female management appointments made during the period. We also invested c.R48 million in training and skills development.

Directorate and executive management changes

As previously announced, Ms Bridget Radebe and Mr Dirk Reich were appointed as independent non-executive directors, effective 1 September 2019.

Ms Thembisa Skweyiya resigned from the board on 31 December 2019. The board thanks Ms Skweyiya for her many years of counsel and guidance in her capacity as a non-executive director and wishes her well.

In keeping with Imperial's non-executive director succession planning, Mr Roddy Sparks retired as lead independent director on 30 October 2019. He remains an independent member of the board. Mr Graham Dempster was appointed to succeed Mr Sparks as the lead independent director on the same date.

Ms Bridget Radebe has been appointed to succeed Mr Dempster as chairman of the audit committee from 1 September 2020. Mr Dempster will remain a member of the audit committee.

After 26 years of service to Imperial, Mr Nico van der Westhuizen, a member of the Imperial executive committee, will be stepping down as CEO of Imperial Logistics South Africa at the end of February 2020. He will be retiring from the group at the end of June 2020 to ensure an orderly handover process. The board extends its sincerest thanks and gratitude to Mr van der Westhuizen for his invaluable contribution to the business, and wishes him well in his retirement. Mr Edwin Hewitt has been appointed to succeed Mr van der Westhuizen from 1 March 2020.

Prospects

Based on the first six months of trading, and particularly the increasingly challenging and volatile economic and market conditions in which we operate, our outlook for the financial year to 30 June 2020 is as follows:

We expect Imperial's continuing operations to deliver:

• 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.
• Good free cash flow generation.

The balance sheet of the business remains sound, with sufficient headroom in terms of capacity and liquidity to facilitate our organic and acquisitive growth aspirations.

Mohammed Akoojee	George de Beer
Chief executive officer	Chief financial officer

25 February 2020

The forecast financial information herein is the responsibility of the directors and has not been reviewed or reported on by Imperial's auditors.

Declaration of interim ordinary dividend

For the six months ended 31 December 2019 notice is hereby given that a gross interim ordinary dividend in the amount of 167,00000 cents per ordinary share has been declared by the board of Imperial, 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 133,60000 cents per share.

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

The company's income tax number is 9825178719.

Share certificates may not be dematerialised or rematerialised between Wednesday, 18 March 2020 and Friday, 20 March 2020, both days inclusive.

RA Venter

Group company secretary

25 February 2020