Unaudited interim results
for the six months ended
31 December 2020

Divisional performance


Our market access business – in which close to 100% of revenue is generated in Africa – is integral to our 'Gateway to Africa' and 'One Imperial' strategy. Our market access solutions see us taking ownership of inventory and responsibility for the full order-to-cash function. We build complex route-to-market solutions that provide our principals with access to patients and consumers through comprehensive channel strategies that integrate sourcing, sales, distribution and marketing. Our solutions also create opportunities to leverage our freight and contract logistics capabilities.

Through our operations in mainly East, West and Southern Africa, we are able to provide market access and logistics services in more than 20 countries on the African continent. Our activities currently focus on two key, defensive industries – healthcare and consumer.

Operating context

The operating environment in most of our markets is experiencing continued levels of volatility. The impact of COVID-19 on the economies of African countries in which we operate is severe and it is evident that this will continue until vaccines are available and herd immunity is achieved, the timing of which is uncertain.

Most countries in which we operate reintroduced COVID-19 restrictions towards the end of the period under review. All businesses in Market Access are currently in operation and our strong position as a leading healthcare and consumer market access player in sub-Saharan Africa continues to stand us in good stead. This is evident as Market Access recorded revenue growth during the period, supported by good contract gains, but at lower margins.

Despite the challenging macro environment, we remain optimistic about the future of our Market Access business. We have invested in appropriate structures and resources to create focused consumer and healthcare teams, which was necessary to achieve future strategic ambitions and growth in these key industries. Recent acquisitions are being successfully integrated and provide cross-selling opportunities. On the African continent, positive trajectories are expected to continue with regard to consumerism, urbanisation, population growth and the strengthening of healthcare systems by governments, which all bode favourably for our Market Access business.

Operating performance (continuing operations)

Market Access results                       
change on 
change on 
Revenue (Rm) 7 415     5 480     35     6 181     20    
EBITDA (Rm) 500     566     (12)    286     75    
Operating profit (Rm) 422     506     (17)    205     >100    
Operating margin (%) 5,7     9,2     3,3          
Return on invested capital (%) 11,3     19,2                
Weighted average cost of capital (%) 11,9     14,1                
Net debt (Rm) 1 830     1 220     50                
IFRS 16 lease obligations included above  333     262     27    
Net debt excluding IFRS16 lease obligations  1 497     958     56    
Net working capital  1 805     1 500     20                
Note: Continuing operations excluding businesses held for sale (Pharmed).

The Market Access business grew revenue by 35% mainly due to the contribution of new acquisitions and organic growth following the addition of new contracts. Operating profit declined 17% and operating margin was under pressure in certain of our businesses (Nigeria and Imres), decreasing from 9,2% to 5,7%. This was mainly due to the impact of COVID-19 on supply chain costs and procurement of certain product categories. The increase in contribution by the Consumer segment post the acquisition of the consumer business in West Africa (Ghana) also contributed to the margin decline. Results benefitted from significant new contract revenue of approximately R2,2 billion on a rolling 12-month basis to the end of December 2020. The contract renewal rate on existing contracts remains strong at c.98%, with a strong pipeline of new opportunities. Operating profit and margins recovered significantly when compared to H2 F2020.

Our strong position as a leading healthcare market access player in sub-Saharan Africa stood us in good stead, particularly during the pandemic. The Healthcare segment benefitted positively from the Namibian healthcare business (Geka Pharma), and good growth from the healthcare business in East Africa (Surgipharm) and Simplified Solutions in Healthcare (Multi Market Aggregation model) which added five new contracts. The healthcare business in West Africa benefitted from market share gains in Ghana while the business in Nigeria continues to contribute significantly despite operating margin pressure due to a change in revenue mix, normalisation of margins on our imported product portfolio and the impact of COVID-19. We have in excess of c.80 days' paid-up stock in Nigeria, which positions us well to deal with the currency risks in the country.

Our healthcare medical supplies and kitting business (Imres) continues to benefit from a strong order book. However, volumes and margins were negatively impacted by higher freight rates and constraints on the supply and delivery of products resulting from COVID-19.

The Consumer segment contributed strongly to results mainly due to the inclusion of the consumer business in West Africa that was acquired in January 2020, which continues to perform better than expectations, as well as adding new contracts. Constraints on alcohol trading impacted some of our businesses. Lower activity was recorded in our consumer business in Mozambique, with margins under pressure. The consumer business in Namibia performed well and in line with expectations. Our newly formed Market Access Consumer business in South Africa is contributing positively.

Axis Group was severely impacted by large procurement projects being delayed due to COVID-19 but the pipeline for new business is encouraging.

Excellent net working capital management resulted in an increase of only 7% in working capital to R1,8 billion during the six months from June 2020 in comparison to revenue that has grown by 35% from the period ending December 2019 to the period ending December 2020.

ROIC decreased from 19,2% to 11,3% due to lower profitability in H2 F2020 over a COVID-19-impacted rolling 12 months – and is marginally lower than WACC of 11,9%.

Competition commission approval for the sale of the Pharmed business in South Africa was received in November 2020 and the sale of this business to the Arrie Nel Pharmacy Group was finalised. The disposal of Pharmed does not represent Imperial's exit from the healthcare industry in South Africa but merely the exit from non-core wholesale activities.

Imperial gained a material consumer contract, effective 1 January 2021, to distribute P&G products in Nigeria through Imperial's JV with the Chanrai Summit Group. Utilising its requisite trading, retail and distribution acumen, the JV is now the single national distributor ensuring fast and reliable distribution and service of P&G's consumer products across Nigeria. This allows Imperial to establish and expand its consumer footprint in this significant and important African market and to leverage its formidable distribution network across the continent.