Unaudited interim results
for the six months ended
31 December 2020

Key industry trends

Below are the key trends for our five core industries:

Healthcare

The demand for healthcare products continues to rise and a five-year CAGR of 18% has been forecast for the healthcare industry in Africa. Imperial is increasing its geographic footprint and exposure to generics, animal health and the medical device market, and is expected to show significant growth by 2023.

Strong growth was achieved in the healthcare industry despite the lack of a flu season and reduced anti-infective sales due to school closures and lockdowns. For the 12 months to December 2020, the healthcare industry generated 21% of total group revenue and delivered revenue growth of 18% when compared to the same period in the previous financial year, with significant growth and exposure achieved with both local and multi-national generic pharma manufacturers. A good contract gain rate of close to 50% was recorded in healthcare, supported by a strong new business pipeline. Five new clients have been onboarded into our Simplified Solutions in Healthcare (multi-market aggregation) offering.

In addition to both the challenges and the opportunities presented by COVID-19, there are a number of other key drivers that are fundamentally impacting the healthcare industry globally. These trends include:

  • evolving population demographics (ageing population)
  • growing urbanisation
  • increased demand for generic pharmaceuticals (promoted mainly by governments)
  • advances in technology
  • changing patient expectations
  • multi-national pharmaceutical companies looking for trusted partners

With healthcare being a key industry of operation and growth, Imperial is well-positioned to leverage these opportunities.

Imperial's expansion of Market Access services in South Africa through its 49% shareholding in Pharmafrique Proprietary Limited (trading as Kiara Health) since August 2020 is providing new growth opportunities too. An Imperial sales team focused on driving demand in the healthcare industry has now been fully deployed in South Africa, promoting Kiara Health and relevant healthcare products.

As reported in 'Our response to COVID-19' section, a number of COVID-19 vaccines have now been approved by stringent regulators which are likely to lead to approvals and initial supplies into sub-Saharan Africa starting from Q2 2021 (calendar year). Imperial is well-positioned to play an active role in the distribution of these critical vaccines in a number of countries across the continent, leveraging our own infrastructure and capabilities and those of our partners. Where feasible, we will participate as tender processes are formalised for the distribution of COVID-19 vaccines in our countries of operation in Africa.

Consumer

COVID-19 has notably changed purchasing trends, consumer behaviour and outsourcing opportunities. The pandemic has identified weaknesses across the value chain and has increased the demand for warehousing services due to growth in e-commerce, the increased need for visibility and resilience, and shortening and diversification of supply chains. With customer needs for enhanced convenience growing at exponential rates, greater pressure has been placed on logistics companies to keep pace.

Notwithstanding difficult trading conditions, lower consumer demand and strict lockdown restrictions imposed on the alcohol sector in South Africa, our consumer industry still achieved double digit growth of c.16% and generated c.32% of group revenue, with monthly revenue during the past four months exceeding pre-COVID 19 levels. The ban imposed on alcohol in South Africa not only impacted the alcohol manufacturers but also key suppliers to the sector. However, the total impact was mitigated by notable new contract gains and a high rate of client retention.

Through our extensive footprint across Africa, Imperial will continue to play a critical role in meeting consumers' ever-increasing need for logistics and market access services in previously inaccessible markets.

Automotive

Despite the significant challenges posed by the COVID-19 pandemic and the various lockdown restrictions, our automotive business delivered strong revenue growth of 18% during the six-month period and contributed c.16% of group revenue, following the easing of restrictions in the industry after plant shutdowns impacted original equipment manufacturers (OEMs) between March 2020 and June 2020. European vehicle manufacturers suffered a more severe impact than most industries in 2020.

The global automotive industry is expected to remain weak during calendar 2021 with forecasts of a 10% decline in vehicle production in the EU and UK in 2021 compared to 2019 levels, due to the impact of global lockdown restrictions in addition to the impact of Brexit. COVID-19 may delay shared mobility and prolong the single user model in the next couple of years, which will also boost the car parts business where Imperial is intrinsically involved globally with various OEMs and suppliers.

The demand for electrical vehicles is strong and the switch from combustion to electric vehicles is moving faster than expected, which is assisting certain markets to rebound from the pandemic. Imperial recorded strong new business gains with OEMs in Europe during the past six months, together with good contract retentions. Cross-selling opportunities with the chemicals industry has made Imperial a significant player in the LI-Ion Battery sector for the automotive industry, which resulted in good contract gains with our existing customer base. OEMs in Europe are starting to regain their planned production levels after the shortage of semi-conductors forced them to slow down production. Semi-conductor manufacturers reassigned their production capacities to other sectors, such as, consumer electronics during the slump in car sales earlier this year caused by the COVID-19 pandemic.

Chemicals

Despite lower global demand for chemical products, our chemicals industry delivered revenue growth of c.2% and contributed c.14% to group revenue. Contract renewals stood in excess of 80% and a strong new business pipeline is in place. Petroleum operations recovered to positive revenue growth following the earlier lockdowns imposed on the sector in South Africa. The chemicals industry includes a very broad range of products which have been impacted by COVID-19 in varying ways. The gas sector has experienced an increased demand for medical oxygen in hospitals while the demand for LPG has declined due to the restrictions imposed on restaurants. Our bulk tanker operations are currently running three to five times more oxygen at the moment compared to 2020 levels as a result of the second wave of COVID-19 infections.

Chemical demand, particularly in Europe, was under pressure prior to COVID-19 and that trend is expected to continue during the first half of calendar 2021 with a slight recovery in the second half of 2021. Approximately 84% of our chemicals industry revenue (excluding energy) is generated from clients in Europe.

While China is expected to become the world leader in production and consumption of chemicals, many commodity chemicals companies have to cope with feedstock price volatility, supply chain and logistics challenges, and unpredictable customer demand. The industry is accordingly investigating alternatives to the reliance on inputs from China-based suppliers. The chemicals industry is also focusing more on green logistics and stricter compliance, which creates opportunities for Imperial.

South Africa will become more dependent on imports for its fuel needs as the country's refining sector is facing an uncertain future with all six refineries under review based on the recent safety concerns.

Industrial and commodities

Our industrial and commodities businesses delivered single-digit revenue growth of c.4%, contributed c.17% to group revenue and saw contract renewals in excess of 95%, with operations recovering to pre-pandemic levels during the past six months. Our well diversified exposure across multiple industrial and commodities sub-sectors, together with new contract gains, limited large volume declines experienced in certain sectors, such as, cement and glass. Production activity in the manufacturing sector rebounded in recent months, with output levels having risen sharply across almost all broad sectors, albeit off low bases.

The South African economy is expected to grow by 3% in 2021 (according to forecasts released by the International Monetary Fund in October 2020), which will boost many of our industrial sub-sectors that are closely associated with the performance of the economy, eg packaging. Good new contract gains were achieved in the steel and metals sector during recent months where Imperial provides customised logistics solutions across our clients' value chains. We manage multiple supply chain functions for numerous clients in the industrial and commodities sector through an integrated 'One Imperial' approach.

Businesses associated with the commodities sector (mining) reported single-digit revenue growth despite the slow ramp-up post-COVID-19 lockdown measures. The mining sector's increased focus on environmental, social and governance (ESG) compliance is expected to create opportunities for Imperial. The implementation of smart logistics initiatives by certain Imperial businesses across selected industrial and commodities sub-sectors has highlighted the key role that these initiatives play in the reduction of overall supply chain costs for our clients.

Approximately 90% of our mining industry solutions are focused on mining activities in Southern Africa using a unique asset-light model that delivers flexible, customised solutions that are not constrained by owned assets in a typically volatile sector. Activity levels in the mining and manufacturing sectors rebounded strongly in the fourth quarter of 2020 as lockdown restrictions were considerably eased. The anticipated recovery in several key African markets from 2021 onwards, complemented by the beneficial ramifications of the African Continental Free Trade Area's implementation, could provide significant trade and investment opportunities for South African businesses, particularly in the industrial industry.