Logistics International encompasses road freight, air and ocean, contract logistics and LLP activities outside of Africa – most notably our contract logistics and freight businesses in Europe and the United Kingdom.
The rising COVID-19 infection rates across Europe in recent months and the subsequent return to lockdown restrictions in a number of European countries and the UK impacted the financial performance of this division. Currently all businesses are operational and performance is improving as the recovery in China began to positively impact European export markets. Automotive production ramped up as car sales volumes recovered, albeit not to pre-COVID-19 levels. While the initial signs of recovery are positive, the passenger car market has been slowing in Europe since September 2020, with consumers trading down from luxury vehicle brands. The chemicals industry is performing in line with expectations. Palletways in the United Kingdom showed volume growth on the back of higher demand due to increased home deliveries and demand for smaller more frequent deliveries by the market. Slower imports into the UK have affected Palletways, with more clarity expected when the new Brexit regulations have been fully implemented. The restrictions on UK car exports to Europe will also impact the international business.
The low water levels in Paraguay negatively impacted the shipping business in South America, which is part of continuing operations, but classified as 'held for sale'.
Logistics International results
| HY1 F2021 |
HY1 F2020 |
% change on HY1 |
HY2 F2020 |
% change on HY2 |
|||
|---|---|---|---|---|---|---|---|
| Revenue (Rm) | 10 705 | 8 755 | 22 | 9 300 | 15 | ||
| EBITDA (Rm) | 1 079 | 952 | 13 | 507 | >100 | ||
| Operating profit (Rm) | 356 | 347 | 3 | (359) | >100 | ||
| Operating margin (%) | 3,3 | 4,0 | (3,9) | ||||
| Return on invested capital (%) | 0,2 | 4,9 | |||||
| Weighted average cost of capital (%) | 5,7 | 5,7 | |||||
| Net debt (Rm) | 4 698 | 4 137 | 14 | ||||
| IFRS 16 lease obligations included above (Rm) | 3 213 | 2 524 | 27 | ||||
| Net debt excluding IFRS16 lease obligations (Rm) | 1 485 | 1 613 | (8) | ||||
| Net working capital (Rm) | (630) | 458 | <(100) |
| HY1 | HY2 | ||||||
| F2021 | F2020 | % change |
2020 | % change |
|||
|---|---|---|---|---|---|---|---|
| Freight | |||||||
| Revenue (Rm) | 6 426 | 4 809 | 34 | 5 223 | 23 | ||
| EBITDA (Rm) | 515 | 520 | (1) | 66 | >100 | ||
| Operating profit (Rm) | 234 | 269 | (13) | (340) | >100 | ||
| Operating margin (%) | 3,6 | 5,6 | (6,5) | ||||
| Contract Logistics | |||||||
| Revenue (Rm) | 4 279 | 3 946 | 8 | 4 077 | 5 | ||
| EBITDA (Rm) | 564 | 432 | 31 | 441 | 28 | ||
| Operating profit (Rm) | 122 | 78 | 56 | (19) | >100 | ||
| Operating margin (%) | 2,9 | 2,0 | (0,5) | ||||
| Note: Continuing operations excluding businesses held for sale. | |||||||
| HY1 F2021 |
HY1 F2020 |
% change on HY1 |
HY2 F2020 |
% change on HY2 |
|||
|---|---|---|---|---|---|---|---|
| Revenue (€m) | 554 | 548 | 1 | 502 | 10 | ||
| EBITDA (€m) | 57 | 59 | (3) | 29 | 97 | ||
| Operating profit (€m) | 18 | 22 | (18) | (19) | >100 | ||
| Operating margin (%) | 3,2 | 4,0 | (3,8) | ||||
| Return on invested capital (%) | 0,2 | 4,9 | |||||
| Weighted average cost of capital (%) | 5,7 | 5,7 | |||||
| Net debt (€m) | 261 | 264 | (1) | ||||
| IFRS 16 lease obligations included above (€m) | 179 | 161 | 11 | ||||
| Net debt excluding IFRS16 lease obligations (€m) | 82 | 103 | (20) | ||||
| Net working capital (€m) | (35) | 29 | <(100) |
| HY1 | HY2 | ||||||
| F2021 | F2020 | % change |
2020 | % change |
|||
|---|---|---|---|---|---|---|---|
| Freight | |||||||
| Revenue (€m) | 332 | 306 | 8 | 282 | 18 | ||
| EBITDA (€m) | 27 | 32 | (16) | 4 | >100 | ||
| Operating profit (€m) | 12 | 17 | (29) | (18) | >100 | ||
| Operating margin (%) | 3,6 | 5,6 | (6,4) | ||||
| Contract Logistics | |||||||
| Revenue (€m) | 222 | 242 | (8) | 220 | 1 | ||
| EBITDA (€m) | 30 | 27 | 11 | 25 | 20 | ||
| Operating profit (€m) | 6 | 5 | 20 | (1) | >100 | ||
| Operating margin (%) | 2,7 | 2,1 | (0,5) | ||||
| Note: Continuing operations excluding businesses held for sale. | |||||||
The performance of Logistics International improved significantly in the first six months of F2021 compared to H2 F2020 as many of our industries of operations are staging a recovery. When compared to H1 F2020, revenue increased by 1% and operating profit declined by 18% in Euros. In Rand terms, revenue from Logistics International rose 22% and operating profit increased by 3% resulting from a significantly weaker Rand versus Euro exchange rate during the period. The average exchange rate in H1 F2021 was R19,19/Euro versus R16,29/Euro in the first half of F2020.
The improved performance compared to H2 F2020 was mainly due to a recovery in vehicle sales in the automotive industry and strong volume growth in our express palletised distribution business (Palletways). Volumes in our chemicals-related businesses were less impacted by COVID-19 and further supported by new contract gains.
Results were partially offset by reduced volumes in the industrial businesses and additional COVID-19 related costs due to an increase in sick leave by our permanent employees who had to be replaced with temporary labour. These additional costs contributed to the operating margin decreasing from 4% to 3,3% (in Rand). New business revenue of c.R2,0 billion (Euros 114 million) was secured on a rolling 12-month basis to the end of December 2020. The contract renewal rate on existing contracts remains strong at c.85%, with an encouraging pipeline of new opportunities despite the impact of the pandemic.
The South American shipping business continues to operate on a standalone basis and is reported as 'held for sale'. During the period, it was significantly impacted by record low water levels which impacted both volumes and margins. More details are included in the Disposals section of this report.
Net capex from continuing operations (excluding IFRS 16) of R108 million was incurred during the year mainly for replacement of transport fleet.
ROIC declined to 0,2% and is lower than WACC due to losses in H2 2020 over a COVID-19-impacted rolling 12 months.